CF Benchmarks predicts a shift in the dominance of hedge funds over investment advisers in BTC ETF markets by 2025, driven by growing client demand and product maturation.
CF Benchmarks, a U.K.-regulated index provider, has predicted that investment advisers will surpass hedge funds as the largest holders of U.S.-listed spot bitcoin (BTC) exchange-traded funds (ETFs) by next year. This shift is expected to occur due to growing client demand, increased understanding of digital assets, and product maturation.
Growing Demand for Digital Assets
The 11 spot BTC ETFs that debuted in the U.S. on January 11 have accumulated over $36 billion in investor funds since their inception. Initially, hedge-fund managers dominated demand, owning 45.3% of the ETFs. However, investment advisers, who serve as gatekeepers to retail and high-net-worth capital, are gaining ground, currently holding 28%.
Investment Advisers to Gain Majority Share
CF Benchmarks expects investment adviser allocations to rise above 50% in both the BTC and ether (ETH) ETF markets by 2025. This transformation is driven by the $88 trillion U.S. wealth management industry’s growing interest in these vehicles, with a combined record-breaking $40 billion in net flows expected in 2024.
Ether ETF Market to See Significant Growth
Investment advisers are already leading the ether ETF market and are likely to extend their lead next year. The growing popularity of asset tokenization is expected to benefit Ethereum‘s parent blockchain, while rival Solana may gain market share due to potential regulatory clarity in the U.S.
Stablecoins and Blockchain Scalability
New entrants like Ripple‘s RLUSD and Paxos‘ USDG are expected to challenge tether‘s USDT dominance. The scalability of blockchains will be tested as active user adoption increases, potentially requiring on-chain capacity to double to over 1600 TPS.
Monetary Policy and Inflation Expectations
The Federal Reserve is seen turning dovish, employing unconventional measures like yield curve control or expanded asset purchases to address the toxic mix of higher debt servicing costs and a weak labor market. This may lead to deeper debt monetization, elevating inflation expectations and bolstering hard assets like Bitcoin as hedges against monetary debasement.
