Nickel: Crypto ETFs are normalising digital assets as flows increase
Growing use of crypto ETPs is normalizing digital assets as part of standard portfolio allocations, new global research from London-based Nickel Digital Asset Management (Nickel) shows.
Research with more than 200 senior executives at institutional investors and wealth managers found 84% agree expansion in the use of crypto ETPs will normalize digital assets in allocation models within three years with more than a quarter (26%) strongly agreeing with this view.
More than half (55%) questioned say they are very likely to use crypto ETPs for the first time in the next two years either to increase digital asset exposure or invest for the first time. Around a fifth (19%) say they are already using them while 23% say they are quite likely to invest in them. Just 3% said they were unsure or unlikely to use them.
They are confident about expansion of global net flows into digital asset ETFs - more than four out of five (81%) expect net flows to increase over the next 12 months including 19% predicting dramatic increases.
The research across the US, UK, UAE, Germany, Switzerland, France, Italy, the Netherlands, Singapore, Brazil and the Nordics found growth in ETP flows will be good for the digital asset sector as a whole. Around 90% say growth in ETPs has had a positive impact on their organisation’s view of the digital asset sector.
Nearly nine out of 10 (87%) expect the growth of ETPs to increase demand for active digital asset managers and hedge funds over the next 24 months with 22% predicting a significant increase in demand. Just 3% expect ETF growth to slightly reduce demand for active managers or hedge funds.
However more than half (52%) say regulatory uncertainty remains the biggest barrier to increased institutional use of crypto ETPs. Around 44% worry that ETFs do not solve underlying market or custody risks while 40% worry about liquidity and trading costs.
The main reason for using crypto ETPs given by respondents is that they are easier to gain investment committee or board approval for, cited by 28%. Around 21% value them for liquidity and transparency while 20% point to easier operational and custody arrangements. Nearly three out of four (74%) say fees or TERs are critical or very important when picking funds.
Respondents are split on which region will see the fastest institutional AUM growth in the sector – 27% say the US while 27% say Europe and 26% the Middle East. Just 11% chose the UK. Multi-asset crypto baskets are expected to see the most growth in institutional digital assets over the next two years with 45% selecting them ahead of 43% picking actively managed digital asset ETFs. Nearly two out of five (39%) chose staking or yield-aware digital asset products and 38% tokenized real-world asset funds.
