Digital Asset Managers to Consolidate

Bitwise Asset Management, the US crypto index fund manager, has agreed to acquire ETC Group, a London-based crypto exchange-traded product issuer, as part of its push into Europe. In a statement on 19 August 2024, Bitwise said ETC Group manages more than $1bn in assets and adds nine European-listed crypto ETPs to Bitwise's suite of ETPs, hedge fund solutions and separately managed accounts. The transaction takes the combined group's total assets under management to more than $4.5bn. Bitwise said it plans to expand the existing ETC Group platform in Europe in a strategic manner.

The deal was discussed against a broader backdrop of expected consolidation in digital asset management. JM Mognetti, chief executive of CoinShares, a European digital asset manager, told a panel at the SALT Wyoming Blockchain Symposium on 20 August that the sector has grown considerably and now includes many managers. He argued that, as in traditional finance, scale economies will drive asset managers to get bigger, and cited CoinShares' acquisition of Napoleon Asset Management, one of the first digital asset managers, in 2022.

Panelists also described how product demand is changing. Steve Kurz, global head of asset management at Galaxy, said crypto now includes futures, options and ETFs, and that investors want exposures beyond pure spot holdings. He noted that Galaxy announced a collaboration in July with State Street Global Advisors to give investors access to the $2.4 trillion digital asset ecosystem through manager-directed strategies. Cynthia Lo Bessette, head of Fidelity Digital Asset Management, said the firm has provided crypto research for more than a decade and that investor education has focused on the broader ecosystem rather than individual tokens, adding that managers can add value beyond token access through portfolio construction across sectors.

The panelists identified concrete use cases, such as tokenized money market funds that could reduce repo funding periods from 24 hours to eight hours, and more liquid secondary markets and transparent price discovery for private equity. They also noted that infrastructure gaps remain, including wallet infrastructure that lets investors view digital and traditional assets side by side, and tools for allocators to construct portfolios across these assets. According to Kurz, profitability over the next three to four years will depend on moving into alternative products, with hedge funds, liquid token funds, venture funds and funds of funds all being tested. He said differentiation will eventually rest on strategy and alpha rather than fees, and described the industry as previously a cottage industry until the US SEC approved spot bitcoin ETFs and then spot ether ETFs this year.