Crypto Assets ETF frenzy sweeps the market

In January 2024, the spot Bitcoin ETF began trading on Wall Street, marking a significant turning point in the Crypto Assets investment sector. Just six months later, the spot Ethereum ETF also officially debuted. Today, regulators are facing 72 applications for Crypto ETFs, and this number continues to grow. From Solana to Dogecoin, to XRP, and even PENGU, asset management companies are competing to package various digital assets into regulated products.

The success of Bitcoin ETFs far exceeded expectations. In just one year, these ETFs attracted $107 billion, setting the highest record in the history of ETF issuance. After 18 months, their asset size reached as much as $133 billion. A large asset management company's Bitcoin ETF alone holds over $74 billion worth of 694,400 Bitcoins. All ETFs combined control 1.23 million Bitcoins, accounting for approximately 6.2% of the total circulation.

This success triggered a chain reaction: ETFs continue to absorb Bitcoin supply, exchange trading balances decline, institutional holdings accelerate growth, Bitcoin price stability improves, and the entire Crypto Assets market gains unprecedented legitimacy. Even during market fluctuations, institutional funds continue to flow in.

The emergence of ETFs has brought mainstream recognition to Crypto Assets. They allow investors to buy and sell digital assets through regular brokerage accounts just like trading stocks, without the need to set up wallets or deal with complex technical details. The custody and security of ETFs are managed by professional institutions, providing investors with a safer and more convenient investment channel.

Several major institutions have submitted applications for Solana ETFs, with a high approval rate of 90%. The ETF applications for XRP, Cardano, Litecoin, and Avalanche are also under review. Even meme coins like Dogecoin and PENGU are not exceptions. This surge is the result of multiple factors, including an improved regulatory environment, institutional recognition of Crypto Assets, and the growing demand for diversified investments.

However, early analysis suggests that the acceptance of altcoin ETFs may differ significantly from that of Bitcoin ETFs. The total inflow for altcoin ETFs is expected to be between several hundred million to 1 billion dollars, far below the achievements of Bitcoin ETFs. The performance of the Ethereum ETF further highlights this gap, attracting only about 4 billion dollars in net inflow over 231 trading days.

One of the main differences between altcoin ETFs and Bitcoin ETFs lies in the staking rewards. Regulators allow ETFs to stake their held assets and distribute the earnings to investors, providing a new value proposition for investors. However, ETFs managing staked crypto assets face complex balancing challenges and need to find a balance between meeting investor redemption demands and maximizing returns.

A large number of ETF applications will almost inevitably lead to fee compression. When many products compete for limited institutional funds, pricing becomes the main differentiating factor. Some issuers may even use staking rewards to subsidize management fees, launching zero-fee or negative-fee products to attract assets.

The surge of altcoin ETFs is changing people's perceptions of crypto asset investment. Different crypto assets are assigned different investment positions: Solana represents speed, XRP focuses on payments, and Cardano markets itself on academic rigor. This diversification offers investors a broader range of choices but also presents new challenges and opportunities.

Ultimately, the market will determine which products can succeed. Regardless, this trend marks the cryptocurrency industry moving towards full mainstream adoption, providing investors with more diversified and convenient channels for Crypto Assets investment.