Why Demand for Crypto ETPs Keeps Rising Despite Market Downturn

18 October 2022, 14:00 GMT+0000
Updated by Geraint Price
18 October 2022, 14:00 GMT+0000
In Brief
  • The number of crypto exchange-traded products (ETPs) continues to grow, in spite of the underlying market diminishing significantly over the past year.
  • Around half of the roughly 180 crypto ETPs on the market launched after Bitcoin started sinking from its peak late last year.
  • While most of the crypto funds are based on Bitcoin and Ethereum, an increasing amount of capital has gone into multi-asset products and those of other altcoins.
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Exchange-traded products (ETPs) based on crypto have continued to grow in number, despite the downturn in the underlying markets.

Roughly half of the more than 180 crypto ETPs currently available were launched after Bitcoin began its significant depreciation over the past 11 months, since its peak last Nov. 

According to a recent note from Morgan Stanley, this indicates that investment firms remain confident that cryptocurrencies, as well as blockchain technology, will eventually come to the fore, in spite of the struggles the market has experienced this year.

A report from KPMG detailed a similar phenomenon taking place with cryptocurrency companies.

What’s the Appeal of Crypto ETPs?

Crypto-based ETPs have proven popular because they provide exposure to the volatile digital assets, without investors having to concern themselves with other complications surrounding the technology.

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These range from having to understand the implications behind personally managing a digital wallet, to keeping their crypto secure against hacks and fraudulent schemes.

Digital asset investment products have experienced inflows amounting to a total of $481 million, year-to-date, according to the latest report from CoinShares.

While data from Morgan Stanley asserts that 95% of the 180 crypto funds available are devoted to the top two cryptocurrencies, Bitcoin and Ethereum, other data offers a more nuanced take.

According to one expert, there has been an increasing amount of asset allocation to funds that combine some of the largest cryptocurrencies by market cap, in addition to just Bitcoin and Ethereum.

CoinShares data also revealed a growing share of inflows directed towards products based on altcoins such as Solana, Cardano and Ripple’s XRP.

Meltdown Sees Market 70% Fall

Yet, even as the availability of these crypto products seems to expand, the total value of the market has shrunk some 70% to $24 billion over the past year. This has been reflected in the prices of some of the most prominent products based on Bitcoin.

Grayscale Bitcoin Trust, the largest Bitcoin fund in the world, saw its total assets under management drop from 34% from $30 million last year to $12.2 billion.

Meanwhile, ProShares Bitcoin Strategy ETF, one of the few crypto ETPs offered in the United States, as it tracks Bitcoin futures rather than spot, also saw its assets under management (AuM) dwindle down to just $600 million, as of the end of Sept., after drawing over $1 billion during its debut last year.

Disclaimer

BeInCrypto has reached out to company or individual involved in the story to get an official statement about the recent developments, but it has yet to hear back.