According to Bernstein, the institutional bitcoin asset management field has the potential to grow into a $650 billion industry in the coming five years.

Bernstein’s recent analysis indicates that the crypto fund management industry currently stands at approximately $45-50 billion in assets. However, the firm foresees a substantial growth potential, with expectations that it could burgeon to a staggering $500-650 billion within the next five years. This projection is rooted in the belief that the cryptocurrency industry is evolving from its current status as a relatively small “cottage industry” to becoming a formally regulated asset management sector.

The anticipated demand for this growth is expected to come from various quarters, including investment advisors, wealth management services, and private banking products. Additionally, the ease of access to Bitcoin exchange-traded funds (ETFs) directly through broker accounts is poised to play a significant role in driving this expansion. (Blockworks)

Bernstein’s report speculates that for this shift to occur, Bitcoin ETFs would need to capture a 10% share of the Bitcoin and Ethereum market capitalization, along with a 5-6% share for liquid crypto hedge funds. The likelihood of Bitcoin ETF approval has been bolstered by filings from established financial heavyweights like Blackrock and Fidelity.

Recent developments, such as the Grayscale case, where the SEC was prompted to review Grayscale’s application to convert its Bitcoin Trust (GBTC) into a Bitcoin ETF, have increased the likelihood of approval by early 2024.

Despite a recent delay in SEC decisions regarding Bitcoin ETF proposals, analysts believe that the regulatory body is likely to pursue a middle-ground approach, considering surveillance sharing agreements with established exchanges like Nasdaq. This approach could pave the way for ETF approvals.

Furthermore, Bernstein highlights the role of stablecoins in the broader cryptocurrency landscape, noting that their primary use case has been in crypto trading and decentralized finance (DeFi) markets. However, they believe that the real potential of stablecoins lies in their transformation into regulated and mainstream payment instruments, offering global settlement capabilities.

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