A surge of cryptocurrency exchange-traded funds (ETFs) may soon enter U.S. markets as early as this fall, potentially transforming access for both institutional and retail investors in the digital asset space. While some view this as a pivotal moment for mainstream adoption, others are already preparing for the likely fallout.
“The crypto ETF floodgates are about to open this fall, and investors will find themselves surrounded by these products,” stated Nate Geraci, president of NovaDius Wealth Management. He believes that most of the 90-plus crypto ETF applications currently filed with the U.S. Securities and Exchange Commission (SEC) will receive approval, assuming they adhere to the final listing criteria.
Ultimately, said Geraci, it will be the investors — not the regulators — who determine which products will succeed.
“The admirable aspect of the ETF market is that it functions as a meritocracy, where investors allocate their money based on performance. The market will naturally differentiate between winners and losers, so I’m not overly worried about an excess of crypto ETFs,” he noted.
Geraci sees the existing demand for diverse and accessible investment avenues as both significant and undervalued.
“Considering the initial traction of futures-based and 1940 Act-structured Solana and XRP ETFs, I feel the demand for 1933 Act spot products in these crypto assets is severely overlooked – similar to the initial response for spot bitcoin and ether ETFs,” he explained.
The iShares Bitcoin Trust (IBIT), managed and issued by BlackRock, has already become the most successful ETF launch in this category, currently holding nearly $85 billion worth of bitcoin for investors.
While ether ETFs experienced lower initial demand compared to their bitcoin counterparts, a recent spike in interest for Ethereum’s native token has led to substantial inflows for ether ETFs, surpassing those for bitcoin ETFs.
Since July, ether ETFs have attracted nearly $10 billion, making up the bulk of total inflows of $14 billion since their launch last year, according to James Seyffart, an ETF analyst at Bloomberg Intelligence.
Geraci also expects strong interest in index-based crypto ETFs, which he believes will offer investors and advisors “a straightforward mechanism to gain exposure to the broader digital asset ecosystem.” For lesser-known tokens, he acknowledges that demand will largely depend on each project’s core fundamentals.
“As you delve deeper into the crypto market cap spectrum, I anticipate that demand for spot ETFs will be more closely linked to the success of individual projects and the performance of their underlying assets — factors that are challenging to predict at this juncture,” he explained.
Seyffart concurs that the pipeline of crypto-related products is on the verge of a significant release — but he remains skeptical about how many will endure.
“If all of those applications eventually launch, there will undoubtedly be closures within the coming years,” Seyffart stated. He envisions “reasonable demand for many of these products,” but believes that expectations must be tempered — particularly regarding altcoins.
“I’m uncertain whether certain lesser-known altcoins will manage to sustain over 5 successful ETFs,” he said. “If people are measuring their success against bitcoin ETFs, they might be sorely disillusioned. Conversely, if others are expecting all to fail, they too will face significant disappointment.”
In his assessment, the market is entering an experimental phase where issuers will release a multitude of products to evaluate performance. “These issuers will launch many offerings and strive to discover what succeeds,” Seyffart remarked. He predicts that the next 12 to 18 months will witness “hundreds of crypto-related ETP launches.”
Both analysts agree on one crucial point: the ETF format fosters an intensely competitive environment where investor interest ultimately dictates success. While SEC approval might open the floodgates, it’s the flow of assets that will ultimately dictate which funds remain in operations.
In the ETF landscape, product closures are an integral aspect — rather than a flaw. Just like in the stock market, insufficient demand or poor performance can lead to fund shutdowns. For investors, this signifies that not every new crypto ETF will be a worthwhile investment, even if it’s associated with a prominent blockchain initiative.
For instance, a Solana ETF could attract buyers if the underlying token continues to engage developers and users. However, five distinct ETFs based on that same coin? That’s where both Seyffart and Geraci assert the market will likely step in.
“If demand fails to materialize, those products will shut down,” Seyffart stated.
This boom is underpinned by the increasing institutional embrace of crypto. Following the SEC’s approval of spot bitcoin and ether ETFs last year, asset managers have hurried to file new offerings linked to Solana , XRP, dogecoin and various others, even including basket funds that track multiple coins. These products offer traditional investors a regulated means to access cryptocurrency markets without needing to establish wallets or manage private keys.
However, with this access comes the obligation to be discerning.
“Ultimately, it will be up to the investors to determine which products are worthwhile and which are not,” Geraci stated. “That’s the essence of the ETF market.”
With potentially hundreds of crypto funds poised to enter the market soon, that determination may need to be made promptly.
