Institutional adoption of bitcoin and ethereum ETFs brings a new era for digital assets

The approval of Bitcoin spot ETFs by the US SEC has validated digital assets, attracting significant institutional investment. This shift sets the stage for broader market participation and new cryptocurrency investment opportunities.

When the US Securities and Exchange Commission approved the first Bitcoin spot exchange traded funds (ETFs) in January, it provided digital assets with validation from the financial establishment and a bridge to broader markets. These ETFs track the spot prices of Bitcoin, providing direct exposure to the underlying assets without the complexity of managing actual cryptocurrencies.

Since then, crypto exchange traded products (ETPs) and ETF’s launched by BlackRock and Fidelity Investments have attracted more than US$30 billion between them.

In the US, the crypto industry is now looking forward to the approval of spot Ethereum ETF’s, while the London Stock Exchange began handling Bitcoin and Ethereum ETP’s for the first time at the end of May.

All of this has massive implications for cryptocurrency as an asset class because for the first time, it is attracting not only active, but passive capital. What it means for the future is that pension funds in Europe, Asia and America and Australian superannuation funds, as well as retail investors, will have the opportunity to invest in the space through a raft of new products. For example, we expect there will be more multi asset ETF’s that will hold Bitcoin in the future.

Zerocap has been a first-mover in this new thematic. Earlier this year we were selected as one of the liquidity providers for the Hong Kong Stock Exchange’s first spot Bitcoin and Ether ETFs. This highlighted Zerocap as one of the leading liquidity providers in Asia for this asset class.  We expect these Hong Kong ETF’s to eventually become accessible to investors in Mainland China, which should generate significant capital inflows.

Zerocap now has over $1billion under management, and is one of the largest liquidity providers for crypto in the Australian market. Our purpose is to eliminate friction in financial markets for our clients. We are now trusted by OTC desks as a core liquidity provider, and our customers include corporations, brokers, foreign exchange providers, hedge funds and global import and exporting firms from Hong Kong, Thailand and Singapore. We expect the big banks to enter this space in the future and they will need firms like us to provide them with liquidity.

More broadly, we expect that the total value of decentralised assets globally will rise further toward the end of the year, underpinned by more ETF announcements and an indication of Fed cuts in 2025. Bitcoin has recently become scarcer than gold in terms of its production value, given that 96% of the 21 million Bitcoins in circulation have already been mined. Given Bitcoin’s production value halves every four years, each halving will continue to effect its supply curve.

The sentiment towards Bitcoin is also being bolstered by bold predictions from some of the big global investment houses. For example Standard Chartered is tipping the Bitcoin price to be $150,000 US by the end of the year and $250,000 US by the end of 2025. When groups of this stature start making these sorts of predictions, the sentiment tends to spread.

Ultimately we believe external macro factors and large financial institutions will shape the market, and sentiment is definitely strong for this asset class in the face of these developments.

While Bitcoin is currently trading like a risk asset, its trading performance can sometimes be inverse to that of other risk assets such as shares. As a result of the dynamics behind this, we believe that over time, Bitcoin could become more of a safe haven asset given its scarcity risk premium. 

So not only will it be a capital growth asset, but ultimately potentially a new hedge against global geopolitical and economic uncertainty.

Zerocap is a leading cryptocurrency flow desk and liquidity provider in Australia and Asia, managing over $1 billion. Specialising in bridging traditional finance and digital assets, Zerocap facilitates institutional investment through smart and innovative crypto products and technology.

To learn more, visit www.zerocap.com