Bernstein analysts eye potential bitcoin ETF approval by ‘early 2024’

Bernstein estimates crypto will mature from a ‘cottage industry’ to an asset management industry

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Bernstein estimates the crypto fund management industry to be around $45-50 billion currently, though it has the ability to be worth over $500 billion of assets in the next five years.  

Analysts said in a research note on Monday they believe the crypto industry is on track to “transition from a cottage industry ($50 billion of managed assets) to a formal, regulated asset management industry with $500-650 billion of assets over the next 5 years.”

The demand, Bernstein said, would come from investment advisors, wealth and private banking products as well as the ability to easily access bitcoin ETFs in direct broker accounts. 

“This would imply a 10% ETF share for bitcoin and ETH market cap, and 5-6% share for liquid crypto hedge funds,” they wrote.

The bitcoin ETF filings from traditional heavyweights Blackrock, Fidelity, and others, have significantly improved chances for a bitcoin ETF, and two courts have sided — or partially sided, in the case of Ripple — with crypto companies. 

Thanks to the Grayscale case, in which a panel of judges asked the SEC to review Grayscale’s application to convert its Bitcoin Trust (GBTC) to a bitcoin ETF, Bernstein now says it believes that “the chances of an approval by early 2024 has significantly increased, and thus [they] like the risk-reward setup from here…”

The SEC, in late August, delayed a set of bitcoin ETF decisions to October. 

Rather than “inventing another reason for refusal,” analysts believe the SEC will go the “middle route” and get comfortable with the surveillance sharing agreement with Coinbase since the proposals are being made by traditional fund managers and the agreements are with regulated exchanges, such as Nasdaq. 

“The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein,” the SEC said at the time. It delayed decisions on Blackrock, Fidelity, Ark, Bitwise and VanEck, among others.

Following the delay, Franklin Templeton announced its bid for a spot bitcoin ETF.

Additionally, analysts at Bernstein noted that stablecoins have led tokenization opportunities with payments adoption. 

“…The use case has been largely crypto trading and DeFi markets, with no major integration with mainstream payments platforms and networks. We believe the real opportunity in stablecoins today is in its transformation from offshore-unregulated-crypto to onshore, regulated and more direct utility around mainstream payments and global settlement,” analysts wrote.


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