Encryption Spot ETF First Year: A Review of 2024 and Outlook for 2025

2024 is a milestone year for the cryptocurrency market. After a ten-year wait, the United States finally approved the listing and trading of the Bitcoin Spot ETF on January 11. This historic breakthrough has triggered a global chain reaction, with several countries and regions such as Hong Kong and Australia successively launching Bitcoin Spot ETF products, significantly promoting the legalization process of encryption assets. As of now, the asset scale of U.S. encryption ETFs has surpassed $122 billion, and Hong Kong has also reached a scale of $46.7 million.

The year 2024 marks the official entry of encryption assets into the mainstream investment field. The latest 13-F filings show that various institutional investors, including donation funds, pension funds, hedge funds, investment advisors, and family offices, have become holders of encryption ETFs. With the successful launch of Bitcoin and Ethereum ETFs, ETF products for other digital assets such as Solana and XRP are also beginning to enter the public eye, laying the foundation for development in 2025.

This article will review the key milestone events of the 2024 encryption Spot ETF, analyze the market performance of encryption ETFs over the past year, and look forward to the development prospects of encryption ETFs in 2025.

Key Milestones Review: The Birth Year of the Encryption Spot ETF

Bitcoin Spot ETF 2024 timeline

On the early morning of January 11, 2024, the global encryption currency industry welcomed a long-awaited historic moment — the United States officially approved the listing and trading of Bitcoin Spot ETF. The trading volume on the first day exceeded 4.6 billion dollars, with a net inflow of 628 million dollars. Just one week later, the managed asset scale of the Bitcoin ETF in the United States surpassed that of the silver ETF, becoming the second largest ETF commodity category in the United States.

Following closely, Hong Kong also took swift action. On April 15, Hong Kong approved in principle the Spot ETFs for Bitcoin and Ethereum. On April 30, 6 virtual asset Spot ETFs were officially listed for trading on the Hong Kong Stock Exchange, with a fundraising scale of approximately 2 billion HKD on the first day and a total trading volume of 87.58 million HKD.

The launch of the Hong Kong cryptocurrency Spot ETF has not only had a profound impact on the financial landscape of the Chinese community but also represents an important step towards the further legalization of cryptocurrencies globally. The Hong Kong crypto ETF employs a physical creation and redemption mechanism, providing a convenient pathway for converting crypto assets into traditional financial assets.

Subsequently, countries such as Australia and Thailand also approved and began trading Bitcoin Spot ETFs. On September 23, the U.S. SEC approved the trading of BlackRock Bitcoin ETF options listed on NASDAQ. On October 19, the SEC further approved the trading of various Spot Bitcoin ETF options. These initiatives further expanded the range of Bitcoin-related derivatives, bringing more compliant and depth-oriented options products to the market.

Ethereum Spot ETF 2024 Timeline

In 2024, the Ethereum Spot ETF has also made significant progress globally. On April 24, Hong Kong became the first to approve the Ethereum Spot ETF, marking its debut on a major exchange. On its first day, the Hong Kong Ethereum Spot ETF saw a net inflow of 14,200 ETH, with trading volume reaching 2.99 million USD.

On May 24, the U.S. SEC approved the first Spot Ethereum ETF's 19b-4 filing, paving the way for Ethereum Spot products to officially enter the U.S. market. On July 23, the U.S. SEC officially approved the listing of the Ethereum Spot ETF. The trading volume on the first day exceeded $1 billion, with a net inflow of $106.6 million.

On November 8, the U.S. SEC delayed its decision on the listing of Spot Ethereum ETF options on the New York Stock Exchange, stating that more analysis and public consultation are needed.

Other encryption-related ETFs 2024 timeline

After the approval of the Bitcoin and Ethereum Spot ETFs, the Solana Spot ETF has also begun to attract attention. On June 20, the first Solana Spot ETF application in North America was submitted. Subsequently, 21Shares and VanEck also submitted applications for the Solana ETF to the SEC.

On August 8, the Brazilian Securities Commission approved the world's first Solana Spot ETF, and on August 21, it approved the second Solana ETF. These initiatives have injected more optimism into the encryption market.

On November 22, Cboe submitted listing applications for 4 Solana Spot ETFs to the US SEC. On December 4, Grayscale sought to convert its Solana Trust Fund into a Spot ETF and list it on the NYSE. However, there are reports that the SEC has notified at least two applicants for Solana Spot ETFs that their submitted 19b-4 filings will be rejected, showing that the US still maintains a cautious attitude towards Solana Spot ETFs.

In addition to Solana, XRP has also become a focus of institutional interest. Currently, Bitwise, 21Shares, and WisdomTree have submitted applications for XRP Spot ETF in the United States.

In addition, various types of encryption-related ETFs will be launched or enter the application stage in November and December, covering different categories such as single encryption assets, multi-asset portfolios, index types, and income types. This trend signifies that the encryption market is gradually moving towards the mainstream and further integrating with the traditional financial system. Encryption assets are becoming one of the core assets recognized by global investors.

ETF Market Performance Analysis

The total assets managed by ETFs listed in the United States exceed $10 trillion, with approximately $40 billion invested in the encryption currency sector, accounting for 0.4% of the overall ETF market. However, according to K33 Research data, the net inflow of Bitcoin Spot ETFs in 2024 accounts for 3.5% of all net inflows into U.S. ETFs, a proportion significantly higher than that of traditional asset classes.

The liquidity of Bitcoin ETFs since their launch is 4.5 times that of inflation-adjusted gold ETFs. Although the cumulative flow still lags behind gold, the assets under management of U.S. Bitcoin ETFs have surpassed those of gold.

It is noteworthy that the BTC holdings of the U.S. Bitcoin Spot ETF have exceeded 1.13 million coins, surpassing Satoshi Nakamoto's Bitcoin holdings, making it the world's largest "Bitcoin holder." These achievements fully demonstrate that the Bitcoin Spot ETF is one of the "most successful" ETF products in history.

As of December 24, the total net inflow of Bitcoin Spot ETF in the United States has reached $35.49 billion, with a total net asset value of $110 billion. Among them, BlackRock's IBIT accounts for nearly 50% of the net asset value, reaching $53.7 billion. It is worth mentioning that the asset size of IBIT is equivalent to the total of 50 ETFs focused on Europe (including regional and single-country ETFs), which have been in existence for 20 years.

The US Ethereum Spot ETF had previously shown lackluster performance, but since November, its inflows and liquidity have significantly increased. On November 13, ETF issuer Bitwise announced the acquisition of Ethereum staking service provider Attestant. On November 20, 21Shares announced the addition of staking functionality to its Ethereum core ETP product, renaming it "Ethereum Core Staking ETP" (ETHC). Coupled with market expectations regarding certain political factors, investor anticipation for the introduction of staking functionality in the Ethereum Spot ETF has intensified.

As of December 24, the total net inflow of Ethereum Spot ETF in the United States reached $2.51 billion, with a total net asset value of $12.35 billion. On December 5, the single-day net inflow reached $428 million, setting a new historical record.

In the United States, the Ethereum Spot ETF with the highest net asset value is Grayscale's ETHE, reaching $4.91 billion, followed by BlackRock's ETF with a net asset value of $3.65 billion. These two ETFs together account for 69.3% of the total assets of Ethereum Spot ETFs in the United States.

2025 Spot ETF Outlook

In 2025, more encryption assets are expected to enter the ETF space. Although regulatory challenges still exist, the continued participation of institutional investors and the gradual maturation of the market will provide more momentum for the future development of the cryptocurrency industry. It is foreseeable that encryption assets will no longer be merely speculative tools, but will become an important component of global investment portfolios, driving the deep integration of traditional finance and digital assets.

Here are some predictions from industry institutions and experts regarding the development of encryption ETFs in 2025:

• The staking feature may be integrated into the Ethereum ETF for the first time in 2025.
• ETFs for Solana and other cryptocurrencies are expected to be launched, and a weighted encryption index ETF may also emerge.
• The listing plans for other encryption currency ETFs besides Bitcoin and Ethereum may be delayed until 2026.
• ETF inflow is expected to continue to increase in 2025, especially as Grayscale's GBTC shifts to a positive net flow.
• The new regulatory leadership may approve more Spot encryption exchange-traded products (ETP).
• Ethereum ETP may expand its functionality to include staking, further enhancing its utility.
• Bitcoin and Ethereum ETP may support physical creation/redemption.
• Regulatory agencies or Congress may take action to pave the way for banks and brokers to custody Spot encryption.
• The inflow of funds for Bitcoin ETF in 2025 may exceed that of 2024.
• Trillions of dollars in funds managed by companies may begin to flow into Bitcoin ETFs.

Overall, the encryption ETF market is expected to further expand and deepen by 2025, providing investors with more diversified investment options in encryption assets. However, changes in the regulatory environment and market risks remain factors that require close attention.