Currently worth around $50 billion, the cryptocurrency asset management industry is expected to experience significant growth over the next five years, with estimates suggesting it could reach a value between $500 billion and $650 billion.
This forecast comes from Bernstein Research analysts led by Gautam Chhugani.
There are several factors contributing to this optimistic outlook. The potential approval of a spot Bitcoin exchange-traded fund (ETF) is one of these factors.
In a recent development, a court ruled that the Securities and Exchange Commission (SEC) erred in rejecting Grayscale Investments' proposal to convert the Grayscale Bitcoin Trust GBTC into an ETF.
The SEC has until mid-October to appeal this decision. The institution will also need to decide on applications from other fund companies that want to launch their own Bitcoin products.
Bitcoin funds could hit the market as early as next year if the SEC stops its objections. Bernstein's team predicts that these ETFs could hold about 10% of the market capitalization of Bitcoin and the second-largest coin, Ethereum.
“Cryptocurrency finance adoption follows hype cycles, and we expect adoption to accelerate sharply with 2024 as the landmark regulatory year for the approval of ETFs,” the analysts wrote.
However, regulatory hurdles continue to deter many institutions from the cryptocurrency market. Despite recent court losses, SEC Chairman Gary Gensler maintains that the crypto industry is rife with fraud and non-compliance with securities laws. In June, the agency sued Coinbase for operating as an unregistered securities exchange, a charge that Coinbase denies.
Despite these challenges, Bernstein analysts believe the sanctions wave is abating. “Regulatory backlash is over for now, and the Coinbase case will provide further clarity,” analysts wrote.
*This is not investment advice.