Cryptoverse: Next wave of US crypto ETFs already in the pipeline

What a difference a year makes.

Rewind the clock to early January 2024, and the asset-management industry was anxiously watching to see if the much-anticipated debut of US spot bitcoin exchange-traded funds could live up to expectations they would pull in as much as $30 billion in their first year.

Today, those issuers are cracking open the champagne.

That first wave of bitcoin ETFs attracted a whopping $65 billion in 2024, helping to propel the price of bitcoin from $43,000 to more than $100,000. The largest of those new products, BlackRock's (BLK.N), opens new tab iShares Bitcoin Trust (IBIT.O), has become the most successful debut in the ETF industry's 35-year history.

But that's just the start of the party, cryptocurrency denizens believe.

Shortly after those products celebrate their first anniversary on 10 January, President-elect Donald Trump - who has pledged to be a crypto president - will be sworn in for the second time, igniting what cryptocurrency fans believe will be a new golden era for the digital asset class.

Applications for new, and often novel, crypto products are already piling up in regulators' inboxes.

"Everyone is now aware of how much money there is to be made, and with a new, more friendly administration, there's no reason not to go ahead and file your best ideas with regulators," said Joe McCann, founder and CEO of digital assets hedge fund Asymmetric in Miami.

While Gary Gensler, Biden's crypto-skeptic Securities and Exchange Commission chair, was forced to approve the first spot bitcoin ETFs - and similar ethereum products - after losing a court challenge, he continued to warn that cryptos are highly volatile and beset by scams and manipulation.

Paul Atkins, Trump's appointee to succeed Gensler, is widely seen as a supporter of digital assets.

As of late November, companies including VanEck, 21Shares, and Canary Capital had seized upon those expectations of an increasingly crypto-friendly tone in Washington by filing at least 16 applications to launch exchange-traded products tracking crypto indices or tokens such as Solana and Ripple's XRP, according to SEC filings and industry sources.

LIGHTER REGULATION EXPECTED

The push to launch the next wave of crypto products began in earnest weeks before the election, with many in the industry anticipating a lighter regulatory touch regardless of whether Trump or his rival, Vice President Kamala Harris, won.

"Since it takes several months to get regulatory approvals and bring an ETF to market, many issuers began making a calculated bet that this year, the climate would be different, and wanted to have their products in the queue ready to go," said Matthew Sigel, head of digital assets research at VanEck, which hopes to launch a Solana ETF in 2025.

In addition to XRP and Solana, which are the fourth- and sixth-largest coins by capitalization, according to CoinGecko, opens new tab, Canary has filed to launch products tied to Litecoin and HBAR, less widely held coins, SEC filings show.

"The last piece of the puzzle was seeing who the new SEC chair would be - that's what we were banking on," said Steven McClurg, who led the launch of the Valkyrie Bitcoin Fund (BRRR.O), opens new tab in January and went on to launch new crypto asset manager Canary Capital in October. "Now, it's off to the races," he added.

The looming crypto ETF gold rush is about more than just products tied to single coins, however. New derivative products are poised to make their debut within days of Trump's inauguration, and new kinds of multi-asset or hybrid products are waiting in the wings.

Several issuers, including Calamos Investments, Innovator ETFs and First Trust, have filed for new funds that would use recently-launched bitcoin ETF options to shield investors from losses on bitcoin itself. The first ones of those products are expected to debut on 22 January, issuers say.

The SEC approved options on some of the bitcoin ETFs late last year, including BlackRock's iShares Bitcoin Trust, and gave CBOE Global Markets (CBOE.Z), the green light to launch options tied to the Cboe Bitcoin US ETF Index - clearing the way for this batch of new ETFs.

Federico Brokate, head of US business for digital asset manager 21Shares, which has launched US bitcoin and ethereum ETFs, in addition to a wider array of offerings in Europe, predicted other new products could include listed funds tied to baskets of cryptocurrencies or that track a mix of alternative assets, such as bitcoin and gold.

"Product innovation in the US is just getting started," he said.

To be sure, such novel products are still a gamble.

While bitcoin ETFs have outperformed, ETFs launched in July tied to the world's second-largest token, ether, have attracted relatively meager inflows of $12.8 billion, according to Paris-based TrackInsight. While bitcoin's price more than doubled in 2024, ether lagged that pace, gaining 53%.

Because less widely-held coins are still in their infancy, factors that drive returns and volatility aren't always clear, said Todd Sohn, ETF analyst at broker-dealer Strategas.

While trading in bitcoin and ethereum futures and futures-based ETFs has existed for several years in the US, so far those are the only coins for which a futures market exists. Sohn said the existence of futures trading has given regulators confidence in the breadth and depth of both bitcoin and ether.

It also remains to be seen how rapidly Atkins will embrace the most novel of the proposed products, given not only the potential risks but also the lingering debate over whether or not these tokens are securities that fall within the SEC's purview.

Still, that regulatory uncertainty is not dampening the enthusiasm of the crypto asset-management industry.

"The only limit on what products emerge will be human creativity," said VanEck's Sigel.