According to a report released by digital asset research firm Diar, digital asset products have seen a substantial increase in inflows throughout 2020, with total inflows reaching over $103 million so far this year. This increase in net activity comes as assets under management (AUM) maintained a $52 billion position.
The research shows that exchange traded products (ETPs) account for the majority of the value of inflows, up to $95 million year-to-date—a nearly three-fold increase compared to the first quarter of 2019 where gross inflows totaled only $34.5 million. ETPs are digital asset products offered by regulated exchanges and track underlying cryptocurrency markets, providing investors with exposure to digital asset investments.
At the same time, net inflows in AUM have remained relatively flat throughout the year, indicating that the majority of inflows have been absorbed in outflows from other products. This is especially true for structured products, which have seen outflows totaling about $39 million year-to-date, while total inflows to the AUM have been far lower at $12 million.
Despite the record inflows, the vast majority of investors are still wary of investing in digital asset products—a sentiment echoed by many regulators responsible for their oversight. The challenge is compounded by the lack of investor protection systems, compliance and oversight standards, which may lead to investors losing out in case of an emergency or dispute.
Overall, the digital asset market continues to grow and is now beginning to attract more diverse investors, from family offices to retail investors. With the maturing of the sector, digital asset products will increasingly be used by more sophisticated investors to gain exposure to the underlying markets. As cryptocurrencies become increasingly institutionalized, robust safety measures and regulations must be addressed in order to ensure investor protection in the digital asset space.
