Crypto fund assets under management (AUM) doubled to $52 billion, with Bitcoin leading the rally

Butterfill said the growing correlation between bonds and equities, which is now at an all-time high, is seen as a driver of investors’ need to diversify their investments effectively.

From 2022 to 2023, the assets under management (AUM) of crypto funds grew by 134%, according to asset manager CoinShares. In 2022, investors’ exposure to Crypto Assets through funds reached $22.3 billion. According to the latest data shared by CoinShares, as of December 22, the figure stood at $52.1 billion.

James Butterfill, head of research at CoinShares, said the sharp increase in AUM can be attributed to macroeconomic movements in 2023. The Fed’s abandonment of interest rate hikes affected the rise in Bitcoin prices in the first half of 2023.

Butterfill explains,

"As an emerging store of value, Bitcoin is particularly sensitive to changes in Intrerest Rate, competing with other stores of value such as Treasuries, which become drop attractive when yields fall. In addition, high Intrerest rates have also created challenges for the banking sector, including the collapse of some large banks and the subsequent intervention of the Federal Reserve to support the system. The turmoil has sparked a chase for quality assets, with Bitcoin being the main beneficiary. ”

Butterfill added that the second half of 2023 was largely driven by market excitement from the possible launch of SpotBitcoin ETFs in the US. With 11 issuers, including BlackRock, the world’s largest asset manager, filing applications with the SEC, and Grayscale’s legal victory over the SEC, Bitcoin prices have been significantly impacted.

The exodus to high-quality assets mentioned by the head of research at CoinShares can be seen in the AUM rise of crypto funds pegged to the price of Bitcoin (BTC), which saw a 173% increase in AUM from 2022 to 2023, accounting for 71.7% of the total AUM.

However, the most significant growth in AUM is the performance of Crypto Assets funds that correlate with the price of Solana. The AUM of these investment vehicles starts at $27 million in 2023 and will reach $747 million by the end of the year, representing an annual growth rate of 2,665%.

Expectations for 2024

James Butterfill sees 2024 as a pivotal year for digital assets, with several key developments expected. A major event is the expected launch of a Spot-based Bitcoin ETF in the United States, a process that has been nearly a decade in the making.

“This development, coupled with the approval of the US SEC, could open market access to a wide range of investors and could mark a significant milestone in the acceptance of digital assets,” Mr Butterfill said. "Even conservative estimates suggest that a 10% increase in liquid assets under management (about $3 billion) could lift the Bitcoin price to about $60,000. ”

In addition, the head of research at CoinShares noted that by 2024, the supply of Bitcoin will be halved, and daily production will be reduced from 900 Bitcoin to 450 Bitcoin, which will historically support price increases. Nonetheless, monetary policy will continue to play a crucial role in Bitcoin valuations, especially as investor preferences change due to Intrerest Raterise.

"While both the US and Europe are expected to cut interest rates, a prolonged period of higher Intrerest Rate could slow the rise in Bitcoin prices. ”

Butterfill said the growing correlation between bonds and equities, which is now at an all-time high, is seen as a driver of investors’ need to diversify their investments effectively. He believes that Bitcoin has proven its potential to offer greater diversification than traditional asset classes. This realization is likely to further increase its adoption rate and valuation in the near future.