The winds of change are blowing through the crypto ETF markets, and investment advisers are set to ride the gale-force gusts to dominance in 2025. According to a groundbreaking report from CF Benchmarks, these gatekeepers to retail and high-net-worth capital are poised to supplant hedge funds as the top holders of both bitcoin (BTC) and ether (ETH) exchange-traded funds (ETFs) in the coming year.
The Rise of Crypto ETFs
The crypto ETF landscape experienced a seismic shift on January 11th, when a staggering 11 spot BTC ETFs made their debut on U.S. exchanges. These innovative investment vehicles provide investors with exposure to the flagship cryptocurrency without the complexities of personal custody and storage. In the mere months since their inception, these ETFs have amassed a jaw-dropping $36 billion in investor capital.
Hedge fund managers, known for their high-risk, high-reward strategies, have thus far dominated the crypto ETF arena, commanding a formidable 45.3% of the total market share. Investment advisers, despite their immense influence over retail and high-net-worth capital, have been relegated to a distant second place, holding just 28% of the market.
Investment Advisers Poised for ETF Dominance
However, CF Benchmarks predicts a dramatic upheaval in the crypto ETF power dynamics come 2025. The index provider, renowned for its meticulous research and insights, forecasts that investment advisers’ share of both the BTC and ETH ETF markets will surge past the 50% threshold in the coming year.
We expect Investment advisor allocations to rise beyond 50% for both assets, as the $88 trillion U.S. wealth management industry begins to embrace these vehicles, eclipsing 2024’s combined record-breaking $40 billion in net flows.
– CF Benchmarks Annual Report
This seismic shift, driven by surging client demand, enhanced understanding of digital assets, and product maturation, is poised to reshape the crypto ETF landscape as these innovative investment vehicles become staples in model portfolios across the wealth management spectrum.
Ether ETFs: Investment Advisers Already in the Lead
In the ether ETF market, investment advisers have already claimed the top spot, and CF Benchmarks anticipates their lead will only widen in 2025. The Ethereum blockchain, the bedrock upon which the ether cryptocurrency is built, is poised to benefit immensely from the burgeoning trend of asset tokenization.
The report predicts that tokenized real-world assets (RWAs) will exceed $30 billion in the coming year, fueling demand for ether as the gas that powers the Ethereum network. Moreover, the potential for regulatory clarity under the incoming administration of President-elect Donald Trump may further boost active user adoption, necessitating a doubling of on-chain capacity to over 1600 transactions per second (TPS).
Stablecoin Shakeup and Fed’s Dovish Turn
The stablecoin market is also bracing for a shake-up, with upstart challengers like Ripple’s RLUSD and Paxos’ USDG vying to unseat tether’s USDT from its perch. Despite tether’s market share surging from 50% to 70%, the landscape remains ripe for disruption.
Perhaps most intriguingly, CF Benchmarks anticipates a dovish turn from the Federal Reserve in 2025. Faced with the noxious brew of elevated debt servicing costs and a softening labor market, the central bank may resort to unconventional measures like yield curve control or expanded asset purchases.
Deeper debt monetization should elevate inflation expectations, bolstering hard assets like Bitcoin as hedges against monetary debasement.
– CF Benchmarks Annual Report
The Crypto ETF Revolution
As the crypto ETF revolution gathers steam, investment advisers are set to assume the mantle of market leadership, reshaping the landscape for retail and institutional investors alike. With a potent combination of regulatory clarity, technological advancements, and shifting monetary policy, the stage is set for a transformative year in the digital asset space.
As the old adage goes, “follow the money.” And in 2025, the smart money will be flowing through investment advisers into the burgeoning crypto ETF market. Buckle up, because the ride is just getting started.
