Capital is moving on-chain, right now, this does not always mean that users are creating accounts directly to move their finances or investments on-chain, especially today.
We can see how this is true for crypto ETFs. Capital moves on-chain to purchase the underlying assets through partner custodians but users' exposure are based on assets that exist off chain.
On-chain account creation does not increase but capital injection does.
Since January, 2024, crypto ETFs have actively been a topic widely covered by major crypto news outlets. Every inflow and outflow have become a trade signal and merely a year, 9 months in, the crypto ETF market is worth over $174 billion.
Bitcoin ETFs, particularly, is a market now worth over $150 billion.
What does this tell us about the next couple of years?
Most ecosystem observers can confirm that traditional finance players are actively exploring ways to invest and capitalize on the crypto markets.
This is why the argument that capital is moving on-chain grows stronger and stronger. From liquidity injection to several product and services launches, TradFi understands the urgency.
As someone who loves to talk about governance, discuss the extent of influence expected from traditional capital moving into the crypto industry, I wanted to understand something about Bitcoin ETFs, so I took a closer look at iShares Bitcoin Trust (IBIT).
I found that IBIT has $88.49 billion assets under management (AUM).
To most crypto natives, like myself, whenever numbers like this are reported, all we can think of is how it isn't that much.
We function in an industry where assets can rise in value to hit several billions within hours, so slapping a “b” to some figures may not always move us.
That said, the focus today wasn't on if IBIT’s assets were significant in comparison to the entire Bitcoin market, but how it ranked in the traditional markets.
According to data from companiesmarketcap.com, IBIT’s spot Bitcoin ETF is the #22 largest exchange traded fund (ETF) by market capitalization out of 1,282 ETFs out there.
As impressive as that is, it wasn't the biggest indicator of what's coming.
If you look at the ETF markets, you'll find that most of the leading ETFs are baskets of equity investments. Meaning that investors are holding exposure to numerous equity markets, which sometimes is over 500.
With IBIT, investors are holding exposure to just one asset. There isn't a bet on stability here, there's only straight up conviction in Bitcoin to outperform every other asset.
iShares Bitcoin Trust (IBIT’s) ETF assets under management, $88.49, is almost 2x larger than BlackRock's biggest holding — NVIDIA CORP — in its iShares Core S&P 500 ETF (IVV), which tracks over 500 equities.
This would suggest that investors are not only comfortable betting on Bitcoin, they are comfortable betting bigger on it.
It also suggests that the Bitcoin ETF market could surge to lead all traditional exchange traded products (ETPs), but of course, this would mean that significant Bitcoin supply would slide into the control of companies that are big on centralized finance.
Yet, it is coming. ETFs will grow to control a significant piece of the crypto markets because many traditional players will choose to gain meaningful economic exposure to the new and booming market through investment products they already understand (and trust?).