Next Wave of US Crypto ETFs is on the Horizon

In early January 2024, the asset-management industry eagerly awaited the debut of U.S. spot bitcoin exchange-traded funds, hoping they would meet the predicted $30 billion in the first year of operation.

It seems like those issuers are celebrating today. As a result of the initial influx of $65 billion into bitcoin exchange-traded funds in 2024, the price of bitcoin soared from $43,000 to over $100,000. Among these new offerings, the biggest one is BlackRock’s (BLK.N) iShares Bitcoin Trust (IBIT.O), which has had the best start of any new ETF in the industry’s 35-year history.

The cryptocurrency community, however, thinks that’s merely the beginning of the celebration.

Crypto enthusiasts anticipate a new golden age for the digital asset class shortly after the goods commemorate their first anniversary on January 10th, when President-elect Donald Trump, who has promised to be a crypto president, will be sworn in for the second time. New and often innovative crypto product applications are already flooding regulators’ inboxes.

A New Administration, A New Era for Crypto

As reported by Reuters, Joe McCann, CEO and founder of the digital assets hedge fund Asymmetric in Miami stated, “Everyone is now aware of how much money there is to be made, and with a new, more friendly administration, there’s no reason not to go ahead and file your best ideas with regulators.”

Even while Biden’s crypto-skeptic securities and exchange commission chair, Gary Gensler, was compelled to approve the first spot bitcoin ETFs and equivalent Ethereum products after losing a court challenge, he persisted in warning that cryptocurrencies are extremely volatile and plagued by scams and manipulation.

As a successor to Gensler, Trump nominated Paul Atkins, who is generally considered an advocate for digital assets. Several companies, like VanEck, 21Shares, and Canary Capital, were quick to capitalize on the hope for a more crypto-friendly stance in Washington. By the end of November, at least sixteen applications had been filed with the SEC to launch exchange-traded products that would track crypto indices or tokens like Solana and Ripple’s XRP.

Expected Less Stringent Regulation

Many in the business were hoping for a softer regulatory approach regardless of the outcome of the election, so they started preparing to introduce new crypto products in the weeks leading up to the election.

“Since it takes several months to get regulatory approvals and bring an ETF to market, many issuers began making a calculated bet that this year, the climate would be different, and wanted to have their products in the queue ready to go,” said Matthew Sigel, head of digital assets research at VanEck, which hopes to launch a Solana ETF in 2025.

According to SEC filings, Canary plans to launch products associated with Litecoin and HBAR, two less popular cryptocurrencies, in addition to XRP and Solana, the fourth and sixth biggest coins by capitalization, respectively, according to CoinGecko.

“The last piece of the puzzle was seeing who the new SEC chair would be – that’s what we were banking on,” stated Steven McClurg, who spearheaded the January debut of the Valkyrie Bitcoin Fund (BRRR.O) and went on to form Canary Capital in October, a new hedge fund for crypto assets. “Now, it’s off to the races,” he added.

More than only products related to particular coins are involved in the impending crypto ETF gold rush. Soon after Trump’s inauguration, new derivative products will hit the market, and new hybrid or multi-asset products will follow shortly after.

Calamos Investments, Innovator ETFs, and First Trust are among the issuers who have submitted proposals for new funds that aim to protect investors from potential losses associated with bitcoin by taking advantage of the recently announced bitcoin ETF choices. Issuers have stated that January 22 is the anticipated debut date for the first of these products.

These new exchange-traded funds (ETFs) were made possible since the SEC authorized options on certain bitcoin ETFs (e.g., BlackRock’s iShares Bitcoin Trust) and gave CBOE Global Markets (CBOE.Z) the go-ahead to launch options linked to the Cboe Bitcoin U.S. ETF Index.

Predictions for Future Products

Federico Brokate, head of U.S. business for digital asset manager 21Shares, has made predictions about potential new products. These products could include listed funds that track a mix of alternative assets, like bitcoin and gold, or that are tied to baskets of cryptocurrencies. 21Shares has already launched U.S. Bitcoin and Ethereum ETFs, and they have a wider array of offerings in Europe.

“Product innovation in the U.S. is just getting started,” he added. Sure, there’s still some risk involved with such innovative items.

According to TrackInsight, a Paris-based research firm, exchange-traded funds (ETFs) linked to ether, the world’s second-largest cryptocurrency, raised a pitiful $12.8 billion since their introduction in July, despite outperforming bitcoin ETFs. In 2024, bitcoin’s price more than doubled, but ether’s price only went up by 53%.

Todd Sohn, an ETF analyst at broker-dealer Strategas, stated that factors driving returns and volatility aren’t always obvious due to the immaturity of less widely-held coins.

In the U.S., you can trade Bitcoin and Ethereum futures and futures-based exchange-traded funds (ETFs) for a number of years now, but those are the only coins that have their own futures markets yet. According to Sohn, authorities now have faith in the depth and breadth of Bitcoin and ether since futures trading is an option.

It’s also unclear how quickly Atkins will purchase the newest of the planned products, given the possible risks and the ongoing debate over whether these tokens are securities subject to SEC oversight.

However, the crypto asset-management business remains enthusiastic despite the regulatory uncertainty.

“The only limit to what products emerge will be human creativity,” VanEck’s Sigel stated.