Industry Updates

Crypto ETPs surge as bitcoin passes $34,000

The price of bitcoin has skyrocketed over 360% since the start of last year

Tom Eckett

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Bitcoin broke through the $30,000 mark for the first time in history at the start of this year amid increasing institutional investor adoption and claims the cryptocurrency is a hedge against inflation.

The cryptocurrency is now trading above $34,000 marking a 360% rise since the start of last year and just three weeks after it hit the $20,000 mark in December.

As a result, crypto exchange-traded products (ETPs) are on the rise with the BTCetc Bitcoin Exchange Traded Cryptocurrency (BTCE) up 14.6% so far this year, as at 4 January, while the 21Shares Crypto Basket Index ETP (HODL), which tracks a basket of cryptocurrencies, has risen 23%.

A key driver of the performance has been the increasing institutional demand for bitcoin last year which helped the European crypto ETP market pass €1bn assets under management (AUM) in December.

Athanasios Psarofagis, ETF analyst at Bloomberg Intelligence, said this was a sign the crypto ETP market was here to stay in Europe.

“Cryptocurrency-linked exchange-traded products in Europe have surpassed €1bn in assets this year, a level that we believe cements the category as a serious driver of industry growth,” Psarofagis continued.

“Strong demand for the strategies is overcoming access hurdles and a recent regulatory ban on selling such ETPs to retail investors in the UK.”

Investors will remember the huge drop the last time the price of bitcoin skyrocketed in late 2017, however, industry commentators are arguing this time is different.

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Anatoly Crachilov, founding partner and CEO of Nickel Digital, said investors are starting to accept bitcoin’s investment thesis as a store of value and an inflation hedge.

“Indeed, the verifiable and immutable scarcity enforced by the Bitcoin protocol has created an asset capable of protecting capital at the time monetary expansion around the world,” he added.

“Family offices, mandated with capital protection, were the first movers to embrace this new inflation hedge, followed by the macro hedge fund money.

“Now we are seeing traditional asset managers and, increasingly, insurance companies exploring allocation to this asset class to address structural asset-liabilities mismatch, exacerbated by a $17trn pile of negatively yielding global bonds.”

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