The big players in the European ETF market are turning their gaze towards the cryptocurrency space amid the lure of significantly higher fees and the opportunity to dominate a new asset class for years to come.
The crypto ETP market has exploded over the past 18 months with more issuers entering the space and launching strategies at a rapid rate.
This includes diversified crypto baskets such as the 21Shares Crypto Basket Index ETP (HODL) all the way through to niche coins like the 21Shares Polkadot ETP (ADOT) and even one ETP, the BTCetc Bitcoin Exchange Traded Cryptocurrency (BTCE), that is now carbon offsettingits emissions from mining.
With the huge returns on offer from digital assets, crypto ETPs are the most expensive strategies across the whole ecosystem in Europe. Highlighting this, ADOT has a 2.5% fee while the cheapest bitcoin ETP is currently 0.95%.
The ballooning space has already tempted more established issuers to launch strategies including the likes of WisdomTree which has €23.8bn assets under management (AUM), as at the end of June, according to data from Morningstar.
However, even larger issuers, most notable Invesco and State Street Global Advisors (SSGA), are taking a very close look at the crypto ETP landscape.
Last week, Invesco announced a new partnership with crypto ETP issuer CoinShares following the latter’sacquisition of the ETF index businessof Elwood Technologies which managed the underlying index of the Invesco Elwood Global Blockchain UCITS ETF (BCHN).
Speaking to ETF Stream, Gary Buxton, head of EMEA ETFs and indexed strategies at Invesco, said the huge benefits of scale was a key reason for the partnership with CoinShares and the planned increased presence within digital assets.
“Invesco is an organisation of scale, as is CoinShares, making this a partnership of huge resource,” Buxton said. “We expect the transition to be a smooth one. Invesco is looking forward to continuing to evaluate developments in the digital space.”
Meanwhile, Matteo Andreetto, head of SPDR ETF business, EMEA, at SSGA, revealed at ETF Stream’sETF Ecosystem Unwrapped event in May, the firm is monitoring the space closely.
“We are looking to crypto and get more and more investors asking about the space,” he told the audience.
The issuers currently in crypto could be looking over their shoulders in the not too distant future with firms such as Invesco and SSGA able to leverage the huge distribution networks they have across Europe, something smaller firms simply cannot do to the same extent.
If digital assets continue their meteoric rise then the space is likely set to be the next battleground for issuers in Europe and whoever comes out on top will reap the rewards in a major way.