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Bernstein Predicts Crypto Funds to Potentially Surpass $650 Billion in 5 Years

Sep 27, 2023 at 10:21 am

The crypto sector is poised for a significant evolution, transitioning from its current status as a decentralized and largely unregulated market to a more formal and regulated asset management industry, according to a recent report.

Bernstein, a brokerage firm, has projected substantial growth for the crypto fund management business, estimating potential assets of up to $650 billion within the next five years. This surge is attributed to the anticipated introduction of spot-based bitcoin exchange-traded funds (ETFs) in the U.S., which is expected to attract a significant influx of capital into the market.

Presently, the crypto industry is often referred to as a "cottage industry," managing approximately $50 billion in assets. This constitutes about 4% of the overall size of the crypto market, which currently stands at $1.08 trillion.

This research follows notable moves by major financial players, such as BlackRock, who have submitted applications for spot-based ETFs to the U.S. Securities and Exchange Commission (SEC). While the SEC has postponed its decision on these applications until October, there is optimism within the crypto market that the eventual approval and launch of spot-based ETFs could open the doors to mainstream investment.

Bernstein anticipates that this surge in demand will be primarily driven by various financial service providers, including investment advisors, integrated products within wealth and private banking, as well as easier accessibility to ETFs through direct broker accounts.

The report suggests that this could translate into a significant share of approximately 10% of the market capitalization for both bitcoin (BTC) and ether (ETH) through ETFs, and a 5-6% share for crypto hedge funds.

The report concludes by stating that the adoption of crypto as a financial asset follows cyclical patterns of hype, and it anticipates a significant surge in adoption, with 2024 identified as a pivotal year for regulatory approval of ETFs in the crypto space.

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