The Rise of Passive Strategies and the Potential of On-Chain Structured Products

Introduction

The asset management industry is a significant global sector, with a substantial portion of assets being held in passive strategies such as ETFs and index funds. In Europe alone, the industry manages €28.4 trillion of assets, with 20% allocated to passive vehicles. This includes approximately half in exchange traded products and the other half in index funds.

The Rise of Passive Strategies

Passively-held assets under management have experienced remarkable growth since 2015, doubling in size. Currently, around one fifth of European retail investors hold passive products. Analysts predict that by 2027, ETFs will account for 24% of total assets in Europe, a significant increase from the current 12%.

The Potential of On-Chain Structured Products

In the world of decentralized finance and digital assets, some experts draw parallels between the on-chain structured product market and the growing influence of passive strategies. However, the on-chain structured product market has yet to gain significant market share. Currently, it represents only 0.07% of the overall crypto market, with a total value locked (TVL) of $2.46 billion across protocols.

Comparing Market Sizes

To put this into perspective, the DeFi market is valued at $48.29 billion, while the total crypto market is worth $1.18 trillion. Although the on-chain structured product market is still relatively small, it has the potential for growth and could play a more significant role in the future.

Conclusion

Passive strategies, such as ETFs and index funds, have become increasingly popular in the asset management industry. In Europe, these strategies account for a significant portion of managed assets, and their influence is expected to continue growing. While the on-chain structured product market is currently small, it has the potential to expand and become more prominent in the world of decentralized finance and digital assets.