Crypto ETFs could also be in for a yr of innovation, with recent funds and recent approaches, but don't expect demand to be as high as Bitcoin ETFs' first yr.
Bitcoin Exchange-traded funds hit the market a yr ago and are considered one of the vital successful ETF launches in history. In the primary yr, they attracted $36 billion in net recent money, led by BlackRock's iShares Bitcoin Trust. The ETFs have been a catalyst for institutional adoption, helping to double the full market value of cryptocurrencies in 2024.
However, the subsequent crypto ETFs could see weaker demand. There are already applications for brand new funding that may be pursued Solana, XRPHedera (HBAR) and Litecoin have been filed, but even when approved this yr they might attract a fraction of the assets which have flowed into Bitcoin ETFs, based on JPMorgan. There was also an application for a hybrid Bitcoin and Ether fund.
“We don’t see the next wave of cryptocurrency.” [exchange-traded product] “Given the much smaller market capitalization of other tokens and far less investor interest, launches are viewed as making sense for the crypto ecosystem,” JPMorgan analyst Kenneth Worthington wrote in a note on Monday.
Worthington noted that $108 billion in assets in Bitcoin ETFs represent 6% of the full Bitcoin market capitalization after the primary yr of trading. For Ether ETFs, which launched with less fanfare in July, that percentage drops to simply 3% ($12 billion) of the coin's market cap after six months.
Applying these “adoption rates” to Solana, which has a complete market cap of $91 billion, JPMorgan predicts that ETFs tied to the token will attract between $3 billion and $6 billion in net recent money. A fund tracking XRP with a market cap of $146 billion would attract an estimated $4 billion and $8 billion in net recent money.
Worthington added that the regulatory environment – particularly the promise of a pro-crypto Congress and White House in 2025, which the industry hopes will spur growth in crypto firms – is impacting the prospects for innovation in crypto. could influence ETFs.
“The regulatory and legal guardrails in the U.S. … will determine the type, quantity and focus of new products and services introduced,” the analyst said. “The new administration and a new SEC chairman open the door to new opportunities in cryptocurrency innovation.”
Tyron Ross, founder and president of registered investment advisor 401 Financial, expects demand for Bitcoin ETFs this yr is not going to reach 2024 levels but will remain “healthy.” This is essentially resulting from investor education and growing confidence within the 16-year-old digital asset class.
However, adoption could speed up if Bitcoin ETFs were added to Wall Street's model portfolios, he said.
“None of these portfolios contain cryptocurrencies. Unless cryptocurrencies exist, you’re not going to see the next phase of growth this year that you saw last year,” Ross told CNBC. “The majority of advisors buy their models off the shelf, and those models have no Bitcoin or crypto [exposure] in them… once that's sorted out, I think you'll start to see this parable [growth] as you saw last year.
“You can sense everywhere that some of the regulatory clouds are clearing and the sky is blue, but expectations for ETFs in the year ahead need to be tempered,” he added.
image credit : www.cnbc.com