Crypto ETFs Expected to Make Up 5% of Hedge Fund Portfolios by 2025

Now that exchange-traded funds (ETFs) are available on major U.S. exchanges, prominent asset managers who previously could not invest in cryptocurrency now have an opportunity to tap into the original digital currency.

For the $30 trillion wealth management sector, this development could lead to a significant influx of capital. Blockchain expert Fiorenzo Manganiello anticipates that, as the market opens up, cryptocurrency ETFs could make up 5% of hedge fund and pension fund portfolios by 2025.

As investors gain the ability to access bitcoin in a manner similar to purchasing stocks, one notable example is BlackRock’s spot Bitcoin ETF, which has garnered $16.7 billion in assets since its launch in January 2024. Furthermore, an Ether ETF is expected to receive final approval from the U.S. Securities and Exchange Commission this summer.

According to Manganiello, who is co-founder and managing partner of LIAN Group, BlackRock’s leadership in crypto adoption among institutional investors is likely to encourage others to follow suit. He indicated that the progress of the Ether ETF will further advance the market.

Manganiello remarked on the regulatory advancements that are prompting increasingly more institutional investors to consider including cryptocurrency in their portfolios. He stated, “Crypto ETFs have been granted regulatory approval, marking a significant milestone for an asset class that has been viewed as volatile and novel. Cryptocurrency is beginning to challenge its critics and gains regulatory legitimacy.”

He emphasized that these institutions are likely to capitalize on what has traditionally been seen as a retail market, diversifying their portfolios and embracing these innovative digital assets.

LIAN Group, which focuses on digital infrastructure, AI, cryptocurrency, and blockchain, has invested over $500 million to date. One of their key initiatives is Cowa, Europe’s largest renewable energy-powered blockchain infrastructure company.

Manganiello also stressed the importance of institutional investors adopting a progressive mindset to stay ahead, notably by embracing emerging alternative investments. He noted that hedge funds and pension funds must be prepared to view cryptocurrencies as legitimate assets, especially with the rapid approval of crypto ETFs on the horizon.