Crypto ETPs gain ground in institutional wealth portfolios

Crypto exchange-traded products are gaining traction among institutional investors and wealth managers, with more than half expecting to use them for the first time within two years.

The findings come from global research by London-based Nickel Digital Asset Management (Nickel), a digital assets hedge fund manager founded by alumni of Bankers Trust, Goldman Sachs and JPMorgan.

Research with more than 200 senior executives at institutional investors and wealth managers found 84% agree expansion in the use of crypto ETPs will normalise 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 9 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% tokenised real-world asset funds.

Anatoly Crachilov, CEO and Founding Partner at Nickel Digital, said: “Crypto ETPs are becoming an important bridge between traditional finance and digital assets. By offering familiar, transparent and operationally straightforward access, they are helping investment committees move digital assets into mainstream portfolio discussions.

“However, ETPs primarily provide passive market exposure. As institutional participation deepens, we expect growing demand for specialist active managers capable of navigating the inefficiencies, volatility and operational complexity of digital asset markets. At Nickel, we have built the institutional-grade risk management, custody architecture and investment capabilities required to capture those opportunities while addressing the standards of governance and asset protection institutional investors expect.”

Re-disseminated by Wealth and Society