In January 2024, the asset-management industry was eagerly awaiting the debut of U.S. spot Bitcoin exchange-traded funds (ETFs), with hopes that they could attract as much as $30 billion in their first year. Fast forward to today, and the results have far exceeded expectations. The first wave of Bitcoin ETFs has pulled in a staggering $65 billion in 2024, significantly contributing to Bitcoin’s price surge from $43,000 to over $100,000. BlackRock’s iShares Bitcoin Trust has emerged as the most successful debut in the ETF industry’s 35-year history.
The Party Has Just Begun
Cryptocurrency enthusiasts believe that this is just the beginning. As President-elect Donald Trump prepares to take office for the second time, expectations are high that his crypto-friendly stance will usher in a new golden era for digital assets. In the wake of his upcoming inauguration, crypto product applications are flooding regulators’ inboxes, signaling that the industry is gearing up for even more innovation.
Regulatory Landscape: Shifting Towards a More Crypto-Friendly Environment
Joe McCann, founder and CEO of Asymmetric digital assets hedge fund in Miami, emphasized the increasing awareness of the potential for making substantial profits in the crypto space. With a more crypto-friendly administration in Washington, McCann believes there is no reason for issuers not to file their best ideas with regulators.
Although Gary Gensler, the Biden-appointed SEC chair, was previously a skeptic of crypto, he was forced to approve the first spot Bitcoin ETFs after a court challenge. However, Paul Atkins, Trump’s appointee to succeed Gensler, is viewed as a supporter of digital assets, which has fueled optimism within the crypto community.
Surge of Crypto ETF Applications
By late November 2024, a growing number of companies, including VanEck, 21Shares, and Canary Capital, had filed applications to launch exchange-traded products tracking popular crypto assets such as Solana and Ripple’s XRP. These filings reflect an increasing expectation that the regulatory environment will become more favorable under a new administration. VanEck, for example, is aiming to launch a Solana ETF in 2025.
Innovative Crypto Products on the Horizon
New derivative products are poised to make their debut, with several issuers, such as Calamos Investments, Innovator ETFs, and First Trust, filing for funds that would use recently launched Bitcoin ETF options to provide investors with protection against Bitcoin price fluctuations. The first of these products is expected to launch on January 22, 2025, after the SEC approved options on some Bitcoin ETFs late last year.
Additionally, the industry is looking at multi-asset or hybrid products, such as funds that track baskets of cryptocurrencies or combine Bitcoin with gold. Federico Brokate, head of U.S. business for 21Shares, predicts that U.S. product innovation in the crypto space is just beginning.
The Road Ahead: Challenges and Opportunities
While the success of Bitcoin ETFs has been remarkable, the performance of Ethereum-based ETFs has been less impressive. Ethereum ETFs, which launched in July 2024, have seen $12.8 billion in inflows, far behind Bitcoin’s performance. With Bitcoin’s price more than doubling in 2024, Ether’s price has increased by 53%.
Despite this, the crypto asset management industry remains bullish. There are risks, including regulatory uncertainty and the potential volatility of less widely held coins. However, the industry’s enthusiasm for new products is unwavering, and many believe that innovation in the space will continue to push boundaries.
As Matthew Sigel of VanEck put it, “The only limit on what products emerge will be human creativity.” The next wave of crypto ETFs is already in the works, and it’s expected to be even more transformative than the first.
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