There were plenty of superlatives to follow in 2021 that marked the debut of the ProShares fund, which tracks Bitcoin futures.
The cryptocurrency had notched up some remarkable milestones globally even before the first Bitcoin futures ETF was launched.
According to Bloomberg data intelligence, the number of crypto tracking platforms doubled from 35 by the end of 2020 to 80 plus in a year. Compared to the $24 billion assets at the start of 2021, the crypto assets grew to $63 billion towards the end of 2021.
Despite the high volatility, cryptocurrency got a more significant investment share amidst rising inflation concerns. The largest cryptocurrency globally, Bitcoin hit a low between April and June before touching an all-time high in November and again only to fall by more than 30% weeks following that. But there was no dent in the flooding of cash.
According to Leah Wald, CEO of Valkyrie Investments, a crypto asset manager, the volumes have been steady despite the volatility of Bitcoin. Many institutions are jumping into cryptocurrency, which is beginning to take off.
Grayscale Bitcoin trust belonging to Grayscale Investments LLC has 30 billion dollars of digital assets considered the world’s largest cryptocurrency fund. Other funds, including Bitwise Asset Management and Galaxy Digital Holdings, also control billions of crypto assets.
The majority of Bitcoin-based funds were launched outside the U.S. in 2021. The October debut of the Bitcoin ETF ProShare got the maximum attention, and it took only two days for the fund to garner $1 billion, one of the busiest starts for an ETF. This surge showed the pent-up demand for Cryptocurrency exposure among investors in the U.S.
Unlike the spot Bitcoin ETF, the future-backed assets are vulnerable to costs associated with managing contracts. According to Bloomberg Intelligence, physically-backed funds are likely to attract even higher investor demand if they were launched in the U.S. According to James Seyffart, an ETF analyst with Bloomberg intelligence, assets in futures crypto can be larger if they had efficient structures like spot ETFs in the U.S.
However, the inflows to the ProShare fund have come down by more than 30% since its launch in Mid-October. Also, other similar funds like VanEck and Valkyrie now have less than $70 million combined assets.
Valkyrie’s Leah Wald is optimistic that in 2022 the flows will pick up as Institutional Managers are waiting to see how the ETF futures are performing in the U.S., particularly handling the rollover costs.
