According to a report from Bernstein on Monday, crypto exchange-traded-funds (ETFs) will bring new capital to the market not only by creating demand in the spot market, but also by signaling regulatory approval of these products. This will produce a growth flywheel for retail and other institutional flows that are seeking legitimacy, the report said.
With the interest of leading global asset managers in bitcoin (BTC) spot ETFs and potential mechanisms to address the U.S. Securities and Exchange Commission (SEC) objections, the probability of approval has risen, analysts led by Gautam Chhugani wrote. Bernstein expects a spot bitcoin ETF market to be sizable, reaching 10% of bitcoin’s market cap in two to three years.
The SEC is continuing to assess applications from traditional finance heavyweights such as BlackRock (BLK) and Fidelity Investments. According to the report, cryptocurrency ETFs will benefit from a strong brand marketing push by leading global asset managers, and a distribution push from retail brokers and financial advisors.
The broker also said that new capital to power up a new crypto cycle will come from fresh stablecoin supply, tokenization of traditional assets, native crypto infrastructure tokenization, and ETFs. On-chain assets have been stuck in a $40B range this year, and stablecoins in circulation at around $120B, the report added.