The surge in bitcoin ETF launches and funds flowing into the sector is transforming institutional investment in digital assets but arbitrage focused hedge funds are still the most attractive way to invest, according to new global research by London-based Nickel Digital Asset Management (Nickel).
Its study with organisations already invested in the sector found 77 per cent expect the flow of funds into bitcoin ETFs to increase over the next 12 months with 13 per cent predicting dramatic increases.
The institutional investors and wealth managers questioned in the US, UK, Germany, Switzerland, Singapore, Brazil and the United Arab Emirates who collectively manage around USD1.7 trillion in assets agree the mainstream adoption of crypto ETFs will have wider and more profound impacts on the sector.
The firm writes that bitcoin ETFs are seen as delivering a range of benefits including lower costs, increased liquidity within established regulatory frameworks and reporting as well as enabling institutional investors to avoid the complexities and risks associated with self-custody.
Institutional investors and wealth managers questioned all agreed that the widespread adoption of bitcoin ETFs is putting pressure on regulators to put comprehensive regulatory frameworks and standardised definitions and classifications in place with 29 per cent strongly agreeing.
However, the research shows arbitrage-focused hedge funds are regarded as the most attractive way for investors to gain exposure to digital assets ahead of ETFs or ETPs.
The latter, in turn, are seen as more attractive than a passively held diversified portfolio of digital assets or an actively managed diversified long-only portfolio of digital assets. The approach rated fifth in the research was an actively managed diversified long/short portfolio of digital assets.
Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, says: “The wider implications of the launch of crypto ETFs are that they helped legitimise the asset class, driving interest to both directional products such as ETFs, as well as the more sophisticated market-neutral strategies via specialised active managers.”
