In anticipation of the scheduled launch of a bitcoin spot exchange-traded fund (ETF) early next year, institutional investors have been actively engaging in trading, according to recent analysis.
Korbit Research Center under the domestic cryptocurrency exchange Korbit revealed this information through its “3rd Quarter Institutional Investor Funding Trends Analysis Report” published on Nov. 13.
The research center analyzed institutional investor trends based on four indicators: bitcoin wrapper, Chicago Mercantile Exchange (CME) bitcoin futures market, cryptocurrency fund management scale, and institutional trading volume within Coinbase, including the status of the institutional investor support business.
A bitcoin wrapper is a financial product created in the form of traditional financial assets with the aim of producing similar investment effects to bitcoin.
Firstly, short-term funds in the third quarter saw even higher inflows compared to the previous quarter when it had reached its peak. This marks a new record surpassing the previous quarter’s peak.
The surge in short-term funds can be attributed to the imminent approval of bitcoin spot ETFs, as multiple signs indicating this have been observed since last month. Consequently, the price of bitcoin has experienced a sharp increase. As of the first week of November, total assets under management for bitcoin wrapper funds have increased by 72 percent compared to the first week of January.
On the other hand, long-term funds have witnessed a delayed recovery, unlike the trend seen in the second quarter.
Additionally, the size of cryptocurrency fund assets under management in the third quarter remained the same as in the second quarter. However, the scale of private fundraising markets has declined to its lowest level since the fourth quarter of 2020, indicating that an economic downturn is still prevalent.
In the third quarter, the institutional trading volume within Coinbase decreased by 17 percent compared to the previous quarter, reaching US$65 billion. The research center attributed this decline to the continued weakness in market maker (MM) activities, stating that, “If a bitcoin spot ETF is launched by the end of this year, making institutional investors’ entry into the cryptocurrency market more visible, we can expect the institutional trading volume within Coinbase to rebound, likely by the first quarter of next year at the latest.”
There are expectations that the launch of spot ETFs based on cryptocurrencies other than bitcoin and ethereum, such as altcoins, could follow. In fact, virtual asset management companies like Grayscale, CoinShares, and 21Shares are already operating investment products based on cryptocurrencies such as ethereum classic, ripple, and solana.
Regarding this, the research center said, “If altcoin-based ETFs can establish the same type of surveillance-sharing agreements as bitcoin spot ETFs to control the risk of price manipulation, then their launch is also possible.”
Chung Suk-moon, director of Korbit Research Center, stated, “Up until the third quarter, institutional funds had been primarily focused on bitcoin, with capital outflows from Ethereum and multi-asset products, which have not yet accounted for the possibility of approving altcoin spot ETFs. The approval of bitcoin spot ETFs is expected to act as a trigger for the release of altcoin spot ETFs. Therefore, institutional funds are likely to flow in even faster in the future.”