Alliance Bernstein (AB), a prominent $646 billion asset manager, has predicted that the Bitcoin and crypto fund management industry is poised for remarkable growth, potentially reaching a staggering $650 billion within the next five years.
This forecast comes on the heels of recent developments that have bolstered the outlook for institutional adoption of Bitcoin by Wall Street firms.
AB estimates that the current size of the crypto fund management sector stands at approximately $45-50 billion. However, the firm’s analysts argue that this figure has the potential to swell to over $500 billion in assets by 2028. This transformation would signify a transition from what AB dubs a “cottage industry” to a fully formalized, regulated asset management sector.
The projected demand driving this growth is expected to emanate from various sources, including investment advisors, wealth management services, private banking products, and the increased accessibility of Bitcoin exchange-traded funds (ETFs) through direct broker accounts.
According to AB, achieving this ambitious goal would necessitate Bitcoin ETFs capturing a 10% share of the total market capitalization of both Bitcoin and Ethereum, while liquid crypto hedge funds would account for 5-6%.
Crucially, recent developments have significantly improved the prospects for Bitcoin ETFs. Traditional financial heavyweights such as Blackrock and Fidelity, along with others, have filed Bitcoin ETF applications. Furthermore, court decisions, particularly the Grayscale case, have urged the U.S. Securities and Exchange Commission (SEC) to reevaluate its stance on crypto ETFs.
AB now believes that the likelihood of SEC approval by early 2024 has substantially increased.
Additionally, AB’s analysts highlighted the growing significance of stablecoins, noting their pivotal role in payments adoption. They emphasized the potential transformation of stablecoins from offshore, unregulated crypto assets to regulated instruments with broader utility in mainstream payments and global settlements.
These predictions align with AB Bernstein’s earlier reports, which indicated that the recent GBTC ruling was a significant step forward and that a spot Bitcoin ETF could gain approval between mid-October and mid-March 2024.