By Suzanne McGee

(Reuters) – Matthew Hougan told an industry panel in October last year that he expected bitcoin-based exchange-traded funds (ETFs) to attract $55 billion in assets in the first five years.

By the end of August this year, about eight months after their debut, 10 fresh funds approved by US regulators had a combined value of more than $52 billion, according to TrackInsight data.

“It’s obvious I wasn’t optimistic enough,” Hougan, CEO of cryptocurrency firm Bitwise Investments, wryly noted. “This is going to be an area that we’re measuring in the hundreds of billions of dollars.”

That remains to be seen. These products track the price of bitcoin, which has jumped many times since its birth 16 years ago when the cryptocurrency era began. Some market players argue that bitcoin is inherently speculative, more like art or fine wine than gold and commodities, which creates volatility and risk.

The road to broad acceptance as a mainstream asset can be ponderous and winding. One milestone came in August. That’s when Morgan Stanley decided to allow its 15,000-strong network of financial advisors to actively recommend at least two fresh bitcoin ETFs to clients—the iShares Trust and the Fidelity Wise Origin Bitcoin Fund.

“The lack of due diligence and understanding of these products is unacceptable right now,” said John Hoffman, head of distribution and partnerships at Grayscale Funds, whose Grayscale Bitcoin Trust was not part of the first wave of products added to the Morgan Stanley platform.

“Wealth management channel risk has reversed towards no-progress risk.”

Retail investors have dominated flows into fresh ETFs. Only a handful of gigantic institutions, such as the Wisconsin State Investment Board and a number of hedge funds, have publicly disclosed their positions in regulatory filings.

“The first $50 billion came from people who understand bitcoin well,” said Sui Chung, CEO of CF Benchmarks, which developed the bitcoin index that underpins several ETFs.

“Now we see the next stage: the risk committee people at Morgan Stanley are being dragged, kicking and screaming, to this decision when advisors can no longer tell their clients no.”

But the fact that pioneers like Morgan Stanley are getting so much attention is an indication of how much ground crypto ETFs have to cover to become part of the mainstream investing scene.

“They are being praised for pioneering this, and that reminds us that as pioneers, they are also seen as risky,” said Andrew Lom, a lawyer at Norton Rose Fulbright who focuses on financial technology, among other things.

For Lom, the real test of whether the fresh ETFs will achieve mainstream status will be not just their size but also their liquidity. “We may already be there,” he said. “At some point, people will start thinking and talking about it as part of the normal investing universe, and then you’ll see the modern portfolio theorists start thinking about how to allocate it.”

Then comes the next test: whether model portfolios, the comprehensive investment products that financial advisors increasingly rely on to make asset allocation decisions, will add them to the mix. Even some of bitcoin’s most ardent advocates concede that’s at least six to 12 months away.

WHAT ABOUT ETHER ETFs?

If bitcoin ETFs are well on their way to becoming part of the mainstream investing scene, the future for ethereum ETFs is less clear.

A month after its July 23 launch, assets in the ether group totaled nearly $7 billion, according to TrackInsight. BlackRock’s (NYSE:) iShares Trust hit $900 million in assets, surpassing all ETF launches but falling miniature of BlackRock’s bitcoin product, which hit $1 billion in its first four days of trading.

“A lot of people were excited leading up to the launch, and then it became a sell-the-news kind of event,” said Adrian Fritz, head of research at 21Shares, one of the firms that launched a spot ether ETF in overdue July. “With more education and time, you’ll also see more excitement around ether.”

Others remain more cautious, noting that ether is not simply a smaller cryptocurrency, but something else entirely.

“If bitcoin is digital gold, then ether is digital oil,” said CF Benchmarks’ Chung. “The reason ethereum could go up in value is because people might need it to move assets around the digital network, just like people use oil to keep the real world running.”

This hybrid nature also requires both regulators and investors to conduct more research and due diligence, he and others said.

“The sales pitch will be longer and more complicated,” Chung said.