January 2024 marked a pivotal moment for the asset-management industry, as expectations soared for the debut of U.S. spot Bitcoin exchange-traded funds (ETFs). Predictions were high, with some forecasting the funds could pull in as much as $30 billion in their first year. Yet, as the year unfolded, the reality surpassed all expectations.
The initial wave of Bitcoin ETFs amassed an astounding $65 billion, propelling the price of Bitcoin from $43,000 to over $100,000. Among the notable success stories was BlackRock’s iShares Bitcoin Trust, which not only led the charge but also made history as the most successful ETF launch in the industry’s 35-year legacy.
But cryptocurrency insiders believe this is only the beginning.
As the first anniversary of Bitcoin ETFs approaches on January 10, 2024, the digital asset community anticipates further growth, spurred by the upcoming second inauguration of President-elect Donald Trump. With promises of a more crypto-friendly administration, many see this as the dawn of a new era for digital assets.
“We’ve reached a tipping point,” said Joe McCann, CEO of Miami-based digital assets hedge fund Asymmetric. “Everyone is now aware of how much money there is to be made, and with a new administration, there’s no reason not to file your best ideas with regulators.”
Following a landmark court ruling, the Securities and Exchange Commission (SEC) – under President Biden’s crypto-skeptic chair Gary Gensler – was forced to approve the first spot Bitcoin and Ethereum ETFs. Despite concerns over volatility, scams, and market manipulation, the regulatory body allowed these products to come to market.
However, with Trump’s incoming SEC chair, Paul Atkins, expected to take a more favorable stance on digital assets, the atmosphere has shifted. Atkins is seen as a supporter of cryptocurrencies, and industry insiders expect lighter regulation under his leadership.
As of late November 2024, at least 16 applications for new crypto-linked exchange-traded products had been filed with the SEC. Companies such as VanEck, 21Shares, and Canary Capital are vying to launch funds tracking assets like Solana and Ripple’s XRP, in response to the growing demand for crypto ETFs.
Regulatory Shifts Fuel New Crypto ETF Applications
The surge of ETF applications began months before the 2024 presidential election, with issuers confident that a new regulatory environment would favor crypto products, regardless of the election outcome. According to Matthew Sigel, head of digital assets research at VanEck, “With regulatory approvals taking several months, issuers were betting that this year would be different, so they began preparing their products in anticipation.”
In addition to Solana and XRP, Canary Capital has filed for products related to other cryptocurrencies like Litecoin and HBAR. “The last piece of the puzzle was determining who would head the SEC,” said Steven McClurg, who helped launch the Valkyrie Bitcoin Fund and now leads Canary Capital. “Now, it’s full speed ahead.”
But the crypto ETF revolution is not confined to single-asset products. New multi-asset or hybrid ETFs are set to launch, combining traditional assets like gold with cryptocurrencies like Bitcoin. Derivative products are also expected to make their debut, including those that use options on Bitcoin ETFs to protect investors from market downturns. The first of these products is expected to be launched by January 22, 2024, following approval from the SEC for Bitcoin ETF options.
Innovative Crypto Products on the Horizon
The next wave of crypto innovation will bring even more variety. Federico Brokate, head of U.S. business for 21Shares, predicts the launch of funds that track baskets of cryptocurrencies or even hybrid funds combining alternative assets. “Product innovation in the U.S. is just getting started,” Brokate said.
Despite the early successes of Bitcoin ETFs, challenges remain. While Bitcoin’s price surged in 2024, Ethereum-based ETFs have underperformed, attracting only $12.8 billion in inflows. As the second-largest cryptocurrency, Ethereum’s growth of 53% in 2024 lagged behind Bitcoin’s more than 100% rise.
The volatility of smaller cryptocurrencies, like Solana and Ripple’s XRP, adds another layer of uncertainty. Todd Sohn, an ETF analyst at Strategas, points out that the factors driving returns for these lesser-known tokens remain unclear, adding to the risks for investors.
A Thriving Industry Amidst Regulatory Uncertainty
Despite these risks, the crypto asset-management industry remains bullish. The sector is bracing for more innovation, fueled by the anticipated regulatory changes under Trump’s administration. “The only limit on what products emerge will be human creativity,” said Sigel, echoing the optimism that has swept through the industry.
With more crypto ETF products poised to hit the market, the digital asset space appears set for even greater growth in the coming years, driven by both regulatory shifts and an increasing appetite for innovation. For now, the crypto world is in full celebration, and the party shows no sign of stopping.
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