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Cryptocurrency ETFs may be entering a year of innovation, with new funds and new approaches, but demand is not expected to match what Bitcoin ETFs experienced in their first year.
Bitcoin The exchange-traded fund launched a year ago and has been hailed as One of the most successful ETF offerings in historyLed by BlackRock, attracted $36 billion in net new assets in first year iShares Bitcoin Trust. ETFs were a catalyst for institutional adoption and helped the total market capitalization of cryptocurrencies double by 2024.
However, demand for the next crypto ETF may wane. Applications have begun for new funding to track Solana, RippleIvy (HBAR) and Litecoin Even if approved this year, they could attract a fraction of the inflows into Bitcoin ETFs, JPMorgan said. There is also an application for a hybrid Bitcoin and Ethereum fund.
“Given that other tokens have much smaller market caps and much lower investor interest, we believe the next wave of cryptocurrencies will The launch of exchange-traded products) does not make sense for the crypto ecosystem.
Worthington pointed out that the Bitcoin ETF assets were worth $108 billion, accounting for 6% of Bitcoin’s total market capitalization after its first year of trading. There was little fanfare for the Ethereum ETF, which launched in July and six months later has shrunk to just 3% of the token’s market capitalization ($12 billion).
Applying these “adoption rates” to Solana, which has a total market capitalization of $91 billion, JPMorgan expects ETFs tied to the token to attract $3 billion to $6 billion in net new assets. Funds tracking XRP have a market capitalization of $146 billion and are estimated to attract between $4 billion and $8 billion in net new assets.
Worthington added that the regulatory environment — specifically, Congress and the White House’s commitment to support cryptocurrencies by 2025, which the industry hopes will spur the growth of crypto businesses — could impact the prospects for innovation in crypto ETFs.
“The regulatory and legislative guardrails in the United States… will determine the type, volume, and focus of new products and services launched,” the analyst said. “A new administration and a new SEC chairman open the door to new opportunities for cryptocurrency innovation.”
Tyron Ross, founder and president of registered investment advisor 401 Financial, does not expect demand for Bitcoin ETFs this year to reach 2024 levels, but will remain “healthy.” This is largely due to investor education and growing confidence in the 16-year-old digital asset class.
However, he said adoption could accelerate if Wall Street’s Bitcoin ETFs were added to portfolio models.
“None of these portfolios include cryptocurrencies, so unless cryptocurrencies are there, you’re not going to see the next phase of growth this year that you saw last year,” Ross told CNBC. “Most advisors buy off-the-shelf models, and There is no Bitcoin or cryptocurrencies (exposure) in these models… When that gets ironed out, I think you’ll start to see parabolic (growth) like you saw last year.
He added: “You can feel that some of the regulatory clouds are lifting and there is blue sky ahead, but expectations for ETFs in the year ahead need to be tempered.”
