The chief investment officer of Bitwise, Matt Hougan, recently made a significant statement regarding the increasing interest in crypto investments within the financial advisory space. According to him, there is a “big unlock” happening, and he expects most major firms to enable access to crypto exchange-traded products (ETPs) by the end of 2025. This shift is anticipated to result in inflows of “many billions” into crypto ETPs.
In the past year, daily inflows for US-traded crypto ETPs have exceeded $1 billion on multiple occasions, showcasing the growing demand for exposure to digital assets. Portfolio allocation norms for crypto investments are also evolving, with Hougan suggesting that “5% is the new 1%” when it comes to allocating crypto assets within traditional portfolios.
Historically, asset managers have recommended conservative allocations to crypto due to its volatility and risk profile. However, institutions are now becoming more comfortable with larger crypto weightings in their portfolios. BlackRock, for example, has incorporated Bitcoin into its model portfolios, recommending a 1% to 2% allocation to the digital asset.
The launch of US spot Bitcoin and Ethereum ETPs in 2024 has provided institutional clients with regulatory-compliant exposure mechanisms, leading to a reevaluation of crypto positioning by many advisors. Ethereum, in particular, has garnered increased interest, with Hougan noting a surge in inquiries about the asset in recent days.
While Bitcoin remains the dominant player in the crypto market, Ethereum has emerged as a significant area of curiosity for professionals. Despite Bitcoin ETPs having higher assets under management (AUM) compared to Ethereum ETPs, ownership of both products is spread across various institutional categories.
Hedge funds and investment advisors are the primary holders of Bitcoin ETPs, while Ethereum ETPs show a more balanced ownership distribution among investment advisors, brokerages, and hedge funds. Family offices, in particular, have shown a strong preference for Ethereum, allocating a significant portion of their crypto holdings to the asset.
Hougan’s observations indicate a maturation phase in professional investment access to crypto assets. As the availability of crypto products expands and allocation norms shift, digital assets are expected to play a more prominent role in traditional portfolio construction.