This year witnessed the launch of a cryptocurrency investment product. It happened in October in the United States. The launch of the Bitcoin futures exchange-traded fund (ETF) paved the way for many cryptocurrency product investments. As a result, the market is experiencing the launch of new products as time unfolds. Based on trading volume, it became a part of the all-time top ETFs upon its launch.
Due to the credibility of ETFs in the traditional finance space, the option of crypto product investments such as Bitcoin ETFs is a pointer to their importance in the massive adoption of virtual currency. The ETF market is expected to attain about $14 trillion as a market cap in 2024.
As a result of this, investors who have been on the fence when it comes to crypto investments due to its volatility can now start engaging the crypto space due to the perks of low-risk maintenance associated with ETFs. Most especially, investors don’t need to hold onto the account or wallets themselves. This is because of the technical difficulties non-crypto natives can face as investors.
Another opportunity crypto ETFs might present investors is the array of opportunities surrounding investment diversification. With this, investors can spread across the different trends of investment baskets and have profit opportunities with time. This gives investors options to invest in different products.
In the last few weeks, we have seen the launch of different options listed on Euronext exchanges. One of them is the Crypto Mega cap Equal Weight ETP, a crypto exchange-traded product (ETP) listed by WisdomTree. This product has the support of Bitcoin and Ether (ETH) as physical backing. Likewise, they launched their Crypto Market (BLOC) and Crypto Altcoin (WALT) products in Europe.
All along, there has been a release of different products to expose individuals to the crypto world. But there is security across each nation to ensure that the products are managed by a credible crypto firm and made available to individual, professional and institutional investors. The success of these products is causing an increase in the creation and launch of new products.
Due to this new development, experts believe that such crypto investment products will open the way for the continued global adoption of cryptocurrency. As a result, this may be the missing puzzle for crypto adoption.
The Intersection between Crypto Investment Products and Crypto Adoption
While these investment products are entering the trade market, institutional investors seem to be the major participants of this new development. That is due to the fact only future products are available for trading. Meanwhile, retail investors are careful of their participation because future trading may cost them more than spot trading. For retail participation to be possible, we need to have more spot products in the trading space.
Regardless of how the crypto space faces friction with global adoption, crypto investment products can be a significant reference for mass adoption with various options. This will not only bring new investors into the space. It will also bring more capital into the space on a long-term basis.
On another note, this will increase the participation rate across different levels of investors. This is a positive indication for the market. As a result, liquidity may spike, and the market infrastructure might have new architecture.
One thing to note here. Investors need to double-check their opportunities and gains. Some crypto investment products were created to grant investors access to the virtual currency space, while some were created to address the volatility problem associated with Bitcoin. This is because volatility is to the crypto market as gas is to automobiles.
But the peak of it all is the ability of crypto investment products to expose investors to Bitcoin and other coins while reducing the risk associated with loss of capital due to market volatility. This is possible due to risk management strategies used in the conventional asset world in the crypto investment products markets.
As it stands, volatility is becoming a stumbling block for regulators to effectively protect investors and allow innovation in the space. Likewise, institutional investors are on the fence due to this associated volatility.
Some concerns sprung due to trade manipulation. But with the establishment of exchanges such as Coinbase, trades are fair and free from manipulation. Thus, market manipulation is less of a concern. However, some institutions and conservative investors would prefer regulated products. But retail investors will keep looking for other options due to the unavailability of spot crypto ETFs across the market.
Embryonic Phase of Crypto Investment Products
When you retrospect into the trading habits of crypto investors over the years, you will agree that the spot market experienced a large volume of trade calls. This is optimal for retail investors, but conservative investors are uncomfortable with it due to the absence of market regulations.
When you compare the state of trading and market infrastructures available for conventional assets and that of the crypto markets, there is a lack of regulation. And this is the reason behind illicit activities cybercriminals exploit in crypto asset trading.
Crypto investment products operate with the regulations of the Commodity Futures Trading Commission. Still, mutual funds exposed to Bitcoin and other cryptos undergo management processes by firms that have shown a strong spot for investor protections. Meanwhile, a change in spot Bitcoin regulatory policy will grant spot Bitcoin a sound basis. Although some spot Bitcoin ETFs are in different jurisdictions.
Although, regulatory policies may stiffen the growth and delivery of investment product manufacturers. But they have proven to protect investors over the years, and this might force investors to look out for products with the country’s regulations.
The availability of futures-based crypto investment products is forcing retail investors to seek more sophisticated products that will exist investors to crypto. Likewise, we are in the early stages of adopting this new development because the total value of the assets for the available 50 products is below twenty billion US dollars.
Having a crypto spot ETF in the market can increase crypto accessibility, but the main purpose is to increase the accessibility of crypto exposure. But spot Bitcoin ETF will increase how the retail investor community will adopt Bitcoin as a trading tool and virtual asset.
Securing crypto investment products will make adoption easier for investors because they won’t need a dedicated account with a crypto trading platform. Instead, they will purchase ETFs through brokerage accounts. This will increase the avenues for investors to participate in the crypto space.
Although we are unsure of the Securities Exchange Commission’s action towards approving a Bitcoin spot ETF, new crypto investment products will create more ways for investors to be exposed to the crypto space. This will morph crypto into a developed market and become an asset class that can mitigate inflation or economic crisis.