The Future of Institutional Investment in Crypto Index Funds

Guy Hirsch, the US Managing Director of the trading platform eToro, recently shared his thoughts on the future of cryptocurrency index funds and ETFs, as well as the different aspects of institutional investment in cryptocurrency in an exclusive interview with ETF Trends.

Hirsch told ETF Trends that institutional investors understand blockchain’s potential, adding the U.S. has “already seen some large institutions break into the crypto market and build out their exposure.”

“Bear markets are especially attractive for institutional investors to enter the fray,” Hirsch said. “Customers have a growing demand for cryptocurrencies, and that’s why we’ve seen institutions — from investment banks to hedge funds like Morgan Creek — move into the crypto space with futures trading desks and crypto index funds.”

Hirsch notes that Goldman Sachs-backed Circle saw a boom in crypto demand from institutional investors in May and June despite the bear market.

Hirsch said some institutional investors may have reservations about investing in cryptocurrencies, noting that one main concern is a lack of custody capabilities in the asset class.

“Custodial concerns are extremely important for CIOs, and if they are unfamiliar with the brand of the custodian of the asset, they won’t get comfortable getting involved in the market,” he said. “Volatility is always a key concern as well, in addition to skepticism about the driver of returns on crypto assets and a lack of regulation in the space.”

To remedy these concerns, Hirsch said crypto platforms and exchanges will need to solve the custody issue in order to attract more institutional investors.