On this week’s episode of Yahoo Finance Future Focus, our host Brian McGleenon spoke to Standard Chartered Head of Crypto Research Geoff Kendrick, who shared his insights into the evolving landscape where traditional finance incumbents, such BlackRock and Franklin Templeton, are involving themselves in the cryptocurrency sphere via the recently launched spot bitcoin exchange traded funds (ETFs). A spot bitcoin ETF is a financial product that investors hope will pave the way for mainstream capital to flood the crypto market. Currently, the indications are favorable, with fund managers having allocated over $4 billion in net inflows to the eleven spot bitcoin ETFs approved by the US Securities and Exchange Commission (SEC) on January 11. Kendrick anticipates a shift in the US 401K market, with retirement fund managers expected to allocate funds to the recently launched ETFs. Additionally, he projected an overall net inflow of approximately $50 billion to $100 billion into spot bitcoin ETFs in 2024. Regarding ether, he foresees the approval of spot ether ETFs by the SEC in May, leading to a net inflow ranging between $20 billion and $35 billion into spot ether ETFs throughout 2024.
Video Transcript
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BRIAN MCGLEENON: Today, we’re joined in the studio by Standard Chartered’s head of crypto research Jeff Kendrick to find out how these dynamics play out in Bitcoin and the crypto market over the coming months. Jeff, welcome to the show.
JEFF KENDRICK: Thanks, Brian. It’s a pleasure.
BRIAN MCGLEENON: The Fed hinted that later than expected interest rate cuts could occur in 2024. In what way could this affect the current climate when it comes to risk assets such as Bitcoin?
JEFF KENDRICK: The big picture importance from the Fed in 2024 is that Treasury yields are likely to be not so volatile. So 2023 went all the way up to 5%, then we came well back below 4%, and now we’re back above 4% just now. So this year, that volatility shouldn’t really play out. And that’s good for very long duration assets like Bitcoin.
Now, what we saw last week from the Fed was a push back from March to likely may or June in terms of the first cut from the Fed. We also had the very strong US employment data out on Friday. As a result of that, Treasury yields have been backing up. So 10-year yields are up about 30 basis points since mid last week.
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.
BRIAN MCGLEENON: OK. So on the subject of higher Treasury yields and the possibility of rate cuts or the delay in rate cuts, could this affect ether. More than Bitcoin in the short and long term?
JEFF KENDRICK: Normally, Ethereum would underperform if risk assets performed badly, which we would have probably expected, given what Treasury yields have done in the last week or so. But a couple of things have happened. Risk assets haven’t sold off. You’ve seen fresh all-time highs in the likes of NASDAQ, NVIDIA particularly, which is sort of the extreme end, if you like, of tech firms.
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.
BRIAN MCGLEENON: There’s also the halving and Grayscale Bitcoin Trust outflows possibly decelerating as the months go on. Is this also going to play in as a factor?
JEFF KENDRICK: I think the Grayscale stuff is pretty much done now. In terms of since the 10th of January, you’ve had large outflows, as you mentioned from Grayscale, about $5.5 billion up to the close last night. Thankfully, you’ve had good inflows into the other new ETFs, about 7 and 1/2.
So the net has been plus $2 billion so far. That’s a pretty good result. In terms of the new ones in particular, $7.5 billion is a massive start. This year, I think we get about $50 to $100 billion of net inflows, so a long way from that just now. But I think we can now start to build momentum.
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.
BRIAN MCGLEENON: How serious are fund managers, those big Wall Street players considering spot Bitcoin ETFs for their clients?
JEFF KENDRICK: It’s extremely important. I mean, the largest one which people were most excited about was the BlackRock ETF. That’s had almost $3 billion already go into it. Fidelity has also done extremely well. So those two very large traditional asset managers that have the ETFs now in Bitcoin have had very good inflows. I’d expect that to continue going forward.
And what we’re now going to see in the US is the 401(k) market, i.e. pensions, et cetera enter Bitcoin and other assets in this space when we get the Ethereum one in May as well for the first time.
BRIAN MCGLEENON: So you have a lot of experience when it comes to FX and crypto and stuff like that within Standard Chartered. So what is your overall feeling now about the attitude that these big institutions are having towards this space, towards crypto in general?
JEFF KENDRICK: Traditional finance is here to stay. So SCB has been one of the first players in this. We’ve been pushing into this space for quite some time. We’re already making markets via Zodia Markets as well. So we are here to stay in this space. And other institutions are also now getting interested, if you like.
So with the spot ETF, the market is becoming more normalized, which I think is necessary at this juncture of growth. You’ll then start to see a build out of the options market, the futures, market, et cetera, as well as TradFi comes online. And you then start to see some of the bigger institutional money, perhaps reserve managers, et cetera, also start to get involved with their counterparts like banks like ours.
BRIAN MCGLEENON: OK. Jeff Kendrick, thanks for coming on this week’s episode “Yahoo Finance Future Focus.”
JEFF KENDRICK: It’s a pleasure, Brian.