The crypto asset management industry is set to experience exponential growth in the coming years, according to analysts at Bernstein Research.
The analysts, led by Gautam Chhugani, predicted that crypto funds could reach a staggering $500 billion to $650 billion within the next five years, a significant leap from the current valuation of approximately $50 billion.
In a note published on Monday, the analysts cited several key factors driving this anticipated growth.
One crucial catalyst is the potential approval of a spot Bitcoin (BTC) exchange-traded fund (ETF).
Last month, the US Court of Appeals for the District of Columbia Circuit ruled in favor of Grayscale, ordering the SEC to set aside its earlier rejection of Grayscale’s application and reopen the review process.
The court ruled that there was no justification for the SEC to allow Bitcoin futures-based ETFs but deny spot Bitcoin ETFs.
The SEC has until mid-October to contest the ruling, coinciding with its decision on whether to approve or postpone applications from other fund companies seeking to launch their own Bitcoin products.
Crypto Funds Could Be Available By 2024
Should the SEC cease resistance, Bitcoin funds could enter the market as early as next year.
The Bernstein team expects ETFs to capture roughly 10% of the market capitalizations of Bitcoin and Ether, the second-largest cryptocurrency.
“Crypto financial adoption follows hype cycles, and we expect a hockey stick adoption, with 2024 as the landmark regulatory year for approval of ETFs.”
In addition to Grayscale, prominent financial institutions such as BlackRock, Fidelity, WisdomTree, and Invesco have applied to launch Bitcoin ETFs.
Some fund companies are also exploring products that hold spot Ethereum (ETH) or Ethereum-linked futures.
Furthermore, industry giants like PayPal Holdings and Visa have either launched their own tokens or announced partnerships to strengthen their involvement in the crypto space.
As reported, PayPal has announced that it is rolling out its PYUSD stablecoin soon.
The dollar-pegged asset is issued by Paxos, a blockchain infrastructure firm that used to issue Binance USD (BUSD) stablecoin.
Meanwhile, Visa has recently completed initial tests that allow users to pay their on-chain gas fees directly in fiat money through Visa card payments.
Regulatory Hurdles Continue to Slow Crypto Adoption
However, regulatory hurdles continue to impede broader institutional adoption.
SEC Chair Gary Gensler, despite the agency’s courtroom setbacks, maintains that the crypto industry is plagued by fraud and noncompliance with securities laws.
During a conference earlier this month, he claimed that crypto has had a destructive impact on millions of investors who have suffered losses.
He even argued that the crypto market could potentially hurt the broader financial system.
“It’s an area that can hurt investors, but it can also hurt the broader economy because it can hurt investor confidence, and finance is ultimately built on trust.”
Despite the absence of comprehensive legislation, Bernstein analysts believe that the wave of enforcement actions is coming to an end.
“The brunt of the regulatory backlash is currently behind us, and the Coinbase case will provide further clarity,” they said.
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