Most Pro Investors Not Invested in Crypto, but About Half Consider Entrance Via ETPs

Three-quarters of professional investors still aren’t invested in crypto, but about half said they are interested in allocating to ETPs focused on the space.

An ETP, or exchange-traded product, is a fund structure that allows investors to gain exposure to one asset, or a basket of different investable assets — in this case, cryptocurrencies. Gaining exposure to crypto via the fund wrapper is overall more appealing than dealing with digital wallets, according to survey respondents.

The study by Trackinsight — with help from fund giants JPMorgan Asset Management and State Street — surveyed 549 professional investors and fund selectors that allocate roughly $900 billion across ETF strategies. 

Though 75% said they don’t have exposure to the sector, 48% said they would consider investing in single-token ETPs. Roughly the same amount — 47% — would potentially be interested in investing in ETPs offering exposure to more than one crypto asset, the survey found.  

Investing directly in cryptocurrencies is less attractive, according to the findings, as 37% reported interest there. Roughly 23% of professional investors said they would not consider investing in crypto. 

Frank Koudelka, global ETF product specialist at State Street, said in a statement that the survey touches on what he called “megatrends” the company is “observing from our perch” as the largest global servicer of exchange traded funds.

The percentage of respondents considering exposure to crypto ETFs is not surprising, he told Blockworks in an email.

“We continue to hear anecdotal evidence that many professional investors consider small allocations to cryptocurrency as an non-correlated asset class that makes sense in a portfolio,” Koudelka added. “Considering the recent run-up in bitcoin prices, there seems to be a growing interest to invest in cryptocurrency via the ETF structure.”

Though bitcoin is up about 64% year to date, its price has dropped roughly 10% in the past month. 

Bryon Lake, head of ETF solutions at JPMorgan Asset Management, said the ETF vehicle is a great way to access thematic investment strategies and to diversify holdings. Investor feedback and demand is a main driver of the firm’s product development discussions, he added.

“But since our active engines are currently not focused on crypto, I’d say [offering crypto ETFs] is not something I see happening in the near future,” Lake told Blockworks.

The surveyed allocators are still most focused on the two biggest assets. When asked which ones they are invested in or could look to allocate to in the future, 59% said bitcoin (BTC) and 49% said ether (ETH). 

Though the SEC has not yet approved an ETF that would invest in bitcoin directly, the securities regulator allowed bitcoin futures ETFs to hit the market in October 2021.

Fund groups continue seeking new types of crypto products, such as Grayscale Investments, which filed last week for three new ETFs. 

Its planned Grayscale Global Bitcoin Composite ETF would invest in ETPs “listed on major non-US exchanges” that hold or are backed by physical bitcoin — and bitcoin mining companies too.

NEOS, a firm focused on options-based income ETFs, filed on Friday to launch a Bitcoin High Income ETF — an actively managed fund that would employ a bitcoin futures call options strategy.

Grayscale, along with other asset managers like Bitwise Asset Management, Direxion and Roundhill Investments, are also seeking to launch products that would give investors exposure to ether futures contracts.

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