ETF Trends To Watch in 2024: Bitcoin’s Impact on Alternatives and Thematics

With a laser focus on the future, David Mann, our Head of Global Exchange-Traded Funds (ETFs) Product and Capital Markets, shares his 2024 outlook for the ETF industry and the key trends he sees taking shape.

I won’t even attempt to wish everyone a happy new year since I’m trying to avoid the wrath of colleagues (and comedian Larry David) who declare January 8 to be the deadline for any such greetings. Also, given the focus on bringing spot bitcoin ETFs to market over the last few months of 2023, I’ve decided to align my predictions column this year with Chinese New Year instead. Kung Hei Fat Choy!

This is my eighth year of offering ETF-related predictions. As usual, last year had some that were spot- on, but also others that were off the mark. In the Chinese zodiac, 2024 is the year of the “Wood Dragon,” which is said to foster growth, progress and abundance. Thus, in lieu of re-reading my old predictions to find the errors of my ways, this year I’m going to let the Wood Dragon philosophy guide me.

And given the enthusiastic feedback I received last year on non-ETF topics, such as Taylor Swift and Colorado football, I’m also adding in some sports and culture predictions. Sadly, one of those predictions (which I am keeping in this article) was for the Detroit Lions to win the Super Bowl, but that dream crashed and burned in gut-wrenching style.

1. The launch of spot bitcoin ETFs will spur an investment boom into alternative ETFs

As I hinted above, we’ve spent a ton of time in recent months building out our infrastructure to ensure that spot bitcoin ETFs would work as designed. Early trading would indicate so far, so good! Volumes have been strong, creates/redeems have been seamless, spreads have been tight, and the price of the ETFs have tracked the spot price of bitcoin as expected. From a capital markets perspective, the plumbing is working properly.

More recently, the conversation has thus shifted from “will they work?” to “how do they fit in a portfolio?” Investors who are fans of the traditional 60% equity/40% fixed income portfolio are now contemplating how adding a small percentage to alternatives, including bitcoin, could impact risk-adjusted returns.

Last year, there were approximately US$2.3 billion of ETF inflows into alternatives, with around one-third of those assets going into cryptocurrency strategies.1 I think that the spot bitcoin wave coupled with investor appreciation for the portfolio construction benefits of adding alternatives should cause inflows to increase substantially. With that said, I predict more than US$10 billion of alternative ETF inflows in 2024.