Crypto ETFs triple in value while investors wait for US approval

The news: Total assets held in crypto ETFs globally reached $9 billion as of June, up from $3 billion the year before, per the Financial Times.

How we got here: While the investment vehicle is yet to be legal in the US, investors have access to crypto ETFs elsewhere, like Canada and Switzerland.

  • Crypto ETFs have become increasingly popular in conjunction with the global adoption boom of the past year.
  • And ETFs have the added benefit of giving investors exposure to a wide range of cryptos without buying separate tokens.
  • They also avoid the additional costs and headaches that come with direct ownership, such as paying for custody services or trying to understand the advantages and risks of custodial and noncustodial wallets.

Why do US firms want to offer crypto ETFs? Market players are attracted by the AUM- and revenue-generating opportunities.

Goldman Sachs recently filed a crypto ETF application, joining more than a dozen applications submitted to the SEC. But the SEC has delayed making any decision and called for greater investor protections from applicants.

Market players eagerly await regulatory approval to boost their AUM and revenues, as seen with Grayscale's ETF-like funds:

  • AUM. The digital asset manager offers crypto trusts in the US, which are not ETFs but private funds open to accredited investors over the counter instead of trading on an exchange. Grayscale’s funds still offer exposure to cryptos and have seen record growth—its AUM reached $33.6 billion in July, up from $2 billion at the start of 2020.
  • Revenues. The asset manager charges a 2% fee on its differentiated product, more than the 0.53% charged for the average ETF.

Looking ahead: Once the SEC gives the green light to crypto ETFs, global AUM growth will accelerate as investors flood in.

  • Institutional investors. More financial institutions will launch crypto ETFs once given the regulatory approval to meet growing demand from US institutional clients.
  • Retail investors. Robo-advisors will get in on the action to give retail investors access to the investment vehicle: Wealthfront recently added access to Grayscale’s trusts, and Betterment is mulling a long-term crypto offering.