Shift To Crypto: 401K Market Poised To Enter Bitcoin ETFs, Standard Chartered Analyst Says

Standard Chartered Analyst Geoff Kendrick recently shared his insights into the future of traditional finance and its intersection with the crypto sphere after the launch of spot Bitcoin Exchange-traded funds (ETFs) in the US.

Kendrick predicts traditional fund managers will turn to crypto investments due to their recent performance and the launch of new crypto-based products soon.

Retirement Fund Managers Ready To Flock To Bitcoin ETFs

In an interview for Yahoo Finance Future Focus, Geoff Kendrick, Head of Crypto Research at Standard Chartered, shares what he believes are the important takeaways of the current economic landscape for the United States.

According to the analyst, the US Federal Reserve hints at interest rate cuts coming later in 2024. This decision could potentially decrease volatility, positively affecting “long-duration assets like Bitcoin and Ethereum.”

Kendrick suggests that the “robust” confidence of investors in the two largest cryptocurrencies helped their strong performance despite inflation:

Actually, Bitcoin and Ethereum and risk assets more broadly have held in very, very well. And I think that’s because we’re now in a situation where we know the cuts are coming because inflation is coming down, most importantly. And the economy remains pretty strong. So there’s a lot of cash that’s been investing in those new ETFs.

The large outflows seen during the first weeks after the launch of the Bitcoin ETFs were also a matter of concern to investors, as the largest cryptocurrency price stability was briefly affected. However, the analyst considers the occurrence as a one-time thing, led mainly by the FTX-related outflows:

As I say, most of that Grayscale noise is out of the way. The FTX component of that, which is about $1 billion in and of itself is all done. And so now I’m very positive on those inflows. And most importantly for Bitcoin, it should mean volatility comes lower. And so if vol is lower, the asset class again becomes much more attractive.

Now that the outflows aren’t outshining the massive inflows into the spot Bitcoin ETFs, noted Kendrick, the attractiveness of crypto-based investment products can expand to new traditional investors like the 401k market.

According to the Standard Chartered analyst, a shift from traditional to crypto-based funds will be expected in the following months. He anticipates retirement fund managers will allocate funds to the recently launched ETFs.

The positive sentiment surrounding ETFs and their massive inflows makes the analyst foresee an even brighter future for the products. Kendrick expects $50 billion to $100 billion of net inflows by the end of the year. “A long way from that just now. But I think we can start to build momentum,” he added.

Positive Sentiment Towards Spot ETH ETFs Approval

During the interview, Kendrick noted that Ethereum’s performance has gone against expectations after it was unaffected by last week’s poor Treasury yields performance.

Unexpectedly, “risk assets haven’t sold off,” and “fresh all-time highs in the likes of NASDAQ, NVIDIA particularly,” occurred instead. He added:

And Ethereum in particular is really an extension of that tech industry, given its likelihood around DeFi and other going forward in the multi-year space. So risk assets have held in pretty well. And obviously, we also have the Ethereum ETF to come up, which I think is coming in May. So that flow into the ETF should also help.

The analyst believes that the 401k market interest in crypto-related investment products will extend to spot Ether ETFs after the US Securities and Exchange Commission (SEC) approval, which he foresees happening in May of this year.

Kendrick predicts a net inflow into spot Ether ETFs between $20 billion and $35 billion throughout 2024 if approved.

Lastly, Kendrick expressed his overall feeling about the big institutions coming into the crypto space. He stated that traditional finance “is here to stay” and believes that crypto-based ETFs are helping normalize the crypto market.

Exposing the big traditional investors to the crypto sphere is a step that he sees as necessary for the evolution of both sectors.