State Street, the world’s largest exchange-traded funds (ETF) service, has reported that demand for crypto ETFs is expected to surpass that of precious metal ETFs in North America by the end of 2025. This would make digital token ETFs the third-largest asset class in the $15 trillion ETF market, behind equities and bonds, and ahead of real estate and multi-asset funds.
Crypto ETF vs Precious Metals
State Street’s global head of ETF solutions, Frank Koudelka stated, “We have been very surprised by the speed of growth of crypto. I expected there to be pent up demand, but I didn’t expect it to be as strong as it was.” Koudelka also shared that the data is showing more advisers are interested in cryptocurrencies as part of their portfolios,” he added. As of now, spot cryptocurrency ETFs, which were only allowed in the US last year, have already amassed $136 billion in assets. Even with the recent market sell-off, this growth signals a promising future.
Precious metal ETFs, led by the $85 billion SPDR Gold Trust (GLD), had a 20-year head start, but State Street has predicted that the combined $165 billion held by North American precious metal ETFs will be overtaken by crypto ETFs in 2025. Additionally, more cryptocurrency ETFs based on tokens like Solana and Litecoin are expected to gain approval from the US SEC this year.
State Street also predicts that by 2025, funds based on the 10 largest cryptocurrencies will be permitted, and SEC approval for ‘in-kind’ creations and redemptions of crypto ETFs will enhance liquidity and tax efficiency. Furthermore, the growth of actively managed ETFs is expected to continue, with active fixed-income ETFs becoming a larger share of ETF flows.
Global ETF markets, particularly in China and Taiwan, are also poised for strong growth in APAC. Moreover, State Street has forecasted that the $506 billion Chinese ETF market will overtake the $573 billion of Japan to become the largest in the Asia-Pacific region, with assets exceeding $700 billion.
