The digital asset market is on the verge of a significant transformation, marked by the imminent arrival of a flood of exchange-traded funds (ETFs). One projection, by James Seyffart, senior research analyst at Bloomberg Intelligence, suggests that “more than 100 cryptocurrency ETFs will launch in the coming months.”
Seyffart, one of the analysts who advance with high probability the approval of bitcoin ETFs (BTC) in January 2024, projects a panorama of accelerated expansion for financial instruments based on cryptocurrencies.
In turn mention which has constantly monitored existing requests. “I’m tracking 150 different products that have been introduced that haven’t been launched yet.”
The analyst explains that This figure includes a variety of products that go beyond simple spot ETFs. “Some are leveraged products, so I don’t know if they count. But we’re talking about 35 different assets for a basket product that all those ETFs track. So there are a lot of applications available. Some will be more imminent than others.”
This wave of launches responds to the usual dynamics of the financial sector. “The point is that, as is usual in the ETF industry, they launch and then see what works,” says the expert, highlighting a market strategy where investment firms propose multiple options to measure investor appetite.
The consolidation of cryptocurrencies in the traditional market
Despite the optimism due to the number of launches, Seyffart warns of the inevitable consolidation that will follow this rapid expansion. The analyst refers to the debate that arose after the approval of spot bitcoin ETFs.
However, he warns that he is not sure “if you can maintain 10 different products for the fourth or fifth largest digital asset on the market,” says Seyffart, drawing a parallel with traditional financial instruments. “It’s a bit like with the S&P. There are nine S&P 500 ETFs that are viable, but three take all the money.”
Currently, the market already has ETFs based on assets such as litecoin (LTC), hedera (HBAR), solana (SOL), XRP and, more recently, dogecoin (DOGE), which were added to bitcoin and ether funds, as reported by CriptoNoticias.
The imminent approval of proposals from firms such as Franklin Templeton for XRP and Grayscale for Chainlink’s LINK is expected, as seen in the following image.
In addition to the aforementioned launches, there are proposals for financial instruments based on other digital assets such as avalanche (AVAX), stellar (XLM), BNB, sui (SUI) and cardano (ADA).
Future projections for the cryptocurrency ETF market
For his part, Eric Balchunas, Seyffart’s colleague at Bloomberg Intelligence, complemented the vision noting that projections of 100 cryptocurrency ETF launches also encompass products structured under the Investment Company Act of 1940 (’40 Act).
This means they are also counting all of these leveraged and inverse ETFs that are going to register under the 1940 Act, which allow investors to earn (or lose) double the return on the underlying asset, not just the spot ETFs.
The expectation is that, as with bitcoin funds, the viability of these new ETFs will depend on whether the underlying asset “has performed well enough and they have achieved enough capital inflows that it will almost certainly be profitable for them in terms of revenue and probably net margin as well,” Seyffart concludes. The analyst warns that this saturation will lead to the disappearance of many funds. “If we look at the next twelve months, I wouldn’t be surprised if many have disappeared.”
This scenario of high competition is favored, in part, by a more permissive regulatory environment driven by the policies of President Donald Trump’s administration towards the digital assets sector, laying the foundations for this boiling of new financial products.