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Digital Assets Inflows Already Top 2021 – Will Crypto Reach Even Further?

Last Updated March 19, 2024 12:37 PM
James Morales
Last Updated March 19, 2024 12:37 PM
By James Morales
Verified by Peter Henn

Key Takeaways

  • Crypto investment products witnessed record inflows last week.
  • Net inflows to all crypto funds and trusts have already reached $13.2 billion in 2024.
  • Accounting for the majority of crypto-backed securities investment, US-listed Bitcoin ETFs have amassed year-to-date inflows of $12 billion.

Throughout the whole of 2021, digital asset investment products attracted net inflows of $10.6 billion. 

This year, crypto funds and trusts have already smashed that record before the first quarter is up, with year-to-date inflows rising  to $13.2 billion as of March 15. If the trend continues, by the end of 2024, they will have a collective cash flow equivalent to some of the world’s largest businesses.

Inflows into Crypto Rise, Digital Assets Fund Investment Boom

There is one major difference between 2024 and 2021: the presence of Bitcoin exchange-traded funds (ETFs) on US securities markets.

Compared to other fund structures, ETFs are significantly more liquid. The US wealth management industry is also the largest source of institutional money in the world. However, it was comparatively untapped by the previous generation of crypto investment vehicles. 

While BTC has always been the preferred digital asset for structured investment products, the runaway success of Bitcoin ETFs has only served to extend this lead.

Of the $13.2 billion total inflows to crypto funds so far this year, around $12 billion  can be attributed to US-based ETF inflows, accounting for over 90% of all money that has flowed into BTC products this year. 

But just because American exchanges take the lion’s share of the global wealth management industry, doesn’t mean other countries aren’t also getting in on the action.

Fidelity Canada Points to Maturing Crypto ETF Market

In Canada, where spot Bitcoin and Ether ETFs have been available to investors since 2021, recent moves from Fidelity point to the growing acceptance of Bitcoin among mainstream investors.

For each of its “All-in-One” range of mixed-asset funds, the firm has allocated between 1% and 3% of assets under management to crypto via the Fidelity Advantage Bitcoin ETF.

fidelity canada bitcoin etf allocation all-in-one
Crypto in funds | Credit: Fidelity Canada.

Significantly, even Fidelity’s conservative All-in-One ETF now holds BTC exposure. This shows how attitudes to digital assets have changed as the institutional taboo against crypto investing has eroded.

In 2024, even the UK’s Financial Conduct Authority (FCA) has relaxed the regulatory boundary that traditionally kept cryptocurrencies at a safe distance from the London Stock Exchange (LSE).

FCA Allows Crypto Asset Exchange-Traded Notes

In a statement last week, the FCA announced that it would lift a ban on crypto-backed exchange-traded products (ETPs)in place since 2021.

While the regulator initially instigated the ban in response to the rise of highly leveraged crypto derivatives, it ended up enforcing one of Europe’s harshest prohibitions against crypto ETPs. 

For investors in the UK, the FCA’s rules essentially banned all spot and futures-based crypto-tracking securities for the next two years.

The heavy-handed approach looks especially out-of-step with the UK government’s post-Brexit narrative of regulatory flexibility. 

Once, the country had the chance to leapfrog the EU and secure a role as Europe’s foremost crypto investment hub. Now, however, it has fallen behind other European nations.

Since the FCA softened its stance, however, the LSE has moved quickly. Just this month, it opened applications for Bitcoin and Ethereum ETNs that could hit the market later this year.

More Changes on the Horizon?

The change to the FCA’s rulebook only affects professional investors. Retail investors are still locked out of regulated crypto products. Crypro assets also remain absent from the LSE’s trillion-dollar ETF market. 

But the loosening of restrictions is significant nonetheless. 

Surging inflows prove that there is plenty of demand for crypto-backed securities. For a country that has traditionally embraced new financial markets, the current state of the UK’s crypto regulation is an anomaly. Looking forward, further FCA amendments may well be on the horizon.

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