The imminent entry of Donald Trump as president of the United States portends a year of innovations in cryptocurrency exchange-traded funds (ETFs), which could shake up the market. This is highlighted by a new report from the research company, VettaFi.
“Several cryptocurrency ETF applications are already in various stages of approval,” stands out the company. “With the new US administration favorable to cryptocurrencies (including a change in the leadership of the SEC), issuers are filling the process with possible new products,” he says.
According to his vision, there are three main areas to take into account in this panorama. First, there is potential for spot ETFs to emerge beyond bitcoin (BTC) and ether (ETH), the only ones currently allowed.
The issuers VanEck, 21Shares and Canary Capital have filed applications to launch cryptocurrency ETFs such as solana (SOL) and XRP. In addition to this, Canary Capital has requested authorization to offer some of litecoin (LTC) and hedera (HBAR).
Second, there may be innovations in the way digital assets are packaged in ETF wrappers. As part of this, there are calls to launch ETFs that include several cryptocurrencies together.
And, ultimately, it is pertinent to know that There are ETF proposals on the table to invest in different assets in this industry, not just spot cryptocurrencies.
For example, “Nexo 7RCC Spot Bitcoin and Carbon Credit Futures ETF” will offer, if approved, 80% spot exposure to bitcoin and 20% carbon credit futures. Another case is “Bitwise Bitcoin Standard Corporations ETF”, which if authorized will invest in companies that have at least 1,000 BTC in their corporate treasuries.
Shares of companies in this industry have gained popularity in the last year, enabling more innovation from exchange-traded funds in that sector, according to VettaFi. Furthermore, he indicates that this could be motivated, given that “many brokerage firms still have trading restrictions for spot bitcoin ETF products.”
With these innovations, the acceleration of the industry that marked a strong step last year would continue. In 2024, 43 cryptocurrency ETFs will be launchedwith more than USD 1 billion in net inflows, as the following graph shows. Half were cash (12 bitcoin and 9 ether).
Spot ETFs invest directly in an asset (in such cases BTC or ETH), purchasing holdings based on capital inflows and selling in proportion to outflows. That is why its flow puts pressure on the price of the currency in question upwards if it is in demand or downwards if it receives money withdrawals.
There are bitcoin spot ETFs that became the largest ETF of large issuers, such as Fidelity, with more than USD 21 billion in such product alone.
New cryptocurrency ETFs will be key to their prices
The possible entry of new cryptocurrency ETFs opens the door for more people to access them. “For investment advisors, retail investors, and many institutional investors, ETFs are our bridge between traditional finance and decentralized finance,” says VettaFi.
That is why these instruments can result in a boost to the price of the assets they invest in if they become in demand. However, it should be noted that this is not guaranteed, as the case of ETH spot ETFs has shown.
Following their launch in mid-2024, ether spot ETFs experienced a period of capital outflows, which affected the price of the cryptocurrency. The withdrawals came from the one issued by Grayscale, which previously operated outside the stock exchange.
Positively for the market, ether ETFs began to obtain flow later and today they accumulate USD 2.4 billion, as the following graph shows. With this, the price of ETH was boosted, although it still remains below the maximum levels it saw three years ago.
In contrast, the launch of bitcoin spot ETFs in the United States, which occurred a year ago, It was the most successful debut of exchange-traded funds. This was because never before had others accumulated so much capital in such a short time since entering the market.
At the moment, these bitcoin ETFs accumulate USD 36 billion, which has contributed to the rise of BTC to new record prices, as reported by CriptoNoticias.
Beyond that, for VettaFi, it’s impressive to see all the ETF milestones resulting from its launches last year. And, with the panorama in progress, predicts that “they will continue to be a relevant part of the history of digital assets in 2025”.