In what could be a long-term positive for cryptocurencies as an asset class, data indicates $2.25 billion in new capital flowed into institutional cryptocurrencies products in 2023. That marks the third-best year of inflows on record.

Gains by major digital currencies, such as bitcoin and ether, were among the factors compelling professional investors to widen their embrace of this nascent asset class. Should that trend continue, it could have positive long-term implications for equity-based ETFs such as the Invesco Alerian Galaxy Crypto Economy ETF (SATO).

“The value of assets under management reached $51B, a 129% increase on the year. This figure was also bolstered by rising cryptocurrency prices, with Bitcoin (BTC) up 160% in the past year, Ethereum (ETH) gaining 80%, and Solana (SOL) surging by more than 900% over the same period,” reported Pedro Solimano for The Defiant.

SATO Could Be in for 2024 Upside

The ETF more than tripled last year. That’s because soaring prices boosted shares of miners, which comprise the bulk of SATO’s lineup. In the essence of prudence, investors shouldn’t expect the fund to replicate 2023’s showing this year. But there are tailwinds that could support more upside for cryptocurrencies and SATO holdings.

For example, SATO’s exposure to bitcoin, which is solidified via the Grayscale Bitcoin Trust (GBTC), could be advantageous at a time when many market observers believe approval of a spot bitcoin ETF in the U.S. is imminent. That could further propel more institutional investors into the cryptomarket.

“BTC was the most heavily favored digital asset among institutions in 2023, with inflows topping $1.9B or 84.5% of the annual total. Bitcoin also accounted for 87% of total flows to and from institutional products for the year (2023),” according to The Defiant.

Another factor to watch as 2024 unfolds is if and how SATO member firms benefit from increased institutional participation in ethereum, Solana, and other digital currencies with ties to those assets. As things stand today, ether is the second-largest digital currency by market value, and 2023 data indicates professional investors are nibbling at that market.

“Solana was the second most popular asset, with inflows to SOL-based products topping $167M for the year. SOL also accounted for 20% of assets managed by institutional crypto product issuers at the end of 2023,” noted The Defiant.

VettaFi LLC (“VettaFi”) is the index provider for SATO, for which it receives an index licensing fee. However, SATO is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of SATO.