The race is on as exchange-traded fund (ETF) companies seek to capitalize on the crypto boom with innovative, and sometimes risky, offerings. Fueled by a record-breaking year in 2024, ETF issuers are filing proposals with the US Securities and Exchange Commission (SEC) for a diverse range of crypto-centric funds aimed at luring investors.
2025 is shaping up to be the year of “crypto everything”, with more than a dozen new ETF products awaiting SEC approval. These funds aim to cater to the growing demand for crypto exposure while pushing the boundaries of investment strategies.
Highlights of Proposed Crypto ETFs
Several notable ETFs are in the pipeline, showcasing the creativity and ambition of fund managers:
1. ProShares S&P 500 Bitcoin-Denominated ETF
- This unique product would denominate the returns of the S&P 500 index in Bitcoin rather than fiat currency.
- Investors gain exposure to traditional equities while tying performance to Bitcoin’s price movements.
2. Strive and REX Convertible Bond ETFs
- These funds focus on convertible bonds issued by companies purchasing Bitcoin, such as MicroStrategy.
- Strive Asset Management plans to incorporate derivatives like swaps and options for diversified exposure.
3. Volatility Shares Solana ETFs
- Proposed funds include inverse and leveraged Solana ETFs, offering opportunities to bet for or against the sixth-largest cryptocurrency.
- Another product would track Solana’s performance using futures contracts, catering to speculative investors.
Why the Rush?
Crypto’s Banner Year in 2024
The crypto market achieved remarkable milestones in 2024:
- Bitcoin surged over 120%, crossing the $100,000 mark for the first time.
- Total crypto market value grew to $3.3 trillion, nearly doubling year-on-year.
- Institutional interest soared, fueled by the launch of the first US Bitcoin ETFs and pro-crypto policies from President-elect Donald Trump.
Investor Demand for Innovation
“Wall Street excels at creating supply when there is demand,” said Todd Sohn, an ETF strategist. The evolving spectrum of crypto ETFs now spans:
- Futures-based ETFs (e.g., Bitcoin futures).
- Spot ETFs (directly tied to the underlying asset).
- Thematic ETFs (focusing on specific crypto trends).
- Convertible bond ETFs (targeting companies with crypto reserves).
Crypto ETFs: Market Dynamics
Record Inflows
BlackRock’s Bitcoin ETF reported annual inflows of $37 billion in 2024, ranking third among all funds globally. This underscores the growing acceptance of crypto as a mainstream asset class.
Corporate Players Double Down
Notable crypto advocate Michael Saylor and his company, MicroStrategy, continued to expand their Bitcoin reserves in 2024 by issuing equity and convertible bonds. Other firms are adopting similar strategies, creating opportunities for new ETF products targeting these companies.
Expert Opinions
Athanasios Psarofagis, Bloomberg Intelligence
“This is the continued evolution of crypto ETFs. Issuers are striking while the theme is hot, and we’ll see a wide variety of launches in 2025.”
Todd Sohn, Strategas
“Crypto is now a new asset class for the investing masses. The current wave of ETF proposals reflects Wall Street’s ability to innovate and cater to this growing demand.”
Risks and Challenges
While the surge in crypto ETFs offers new opportunities, it comes with significant challenges:
- Regulatory Uncertainty
- The SEC’s approval process could delay or restrict the launch of certain ETFs.
- Market Volatility
- Cryptocurrencies are inherently volatile, which could amplify risks in leveraged or inverse ETFs.
- Investor Education
- Many investors may not fully understand the complexities of ETFs tied to crypto derivatives or convertibles.
Conclusion
The race to launch crypto-focused ETFs in 2025 highlights the dynamic growth and innovation within the cryptocurrency market. From Bitcoin-denominated S&P 500 funds to convertible bond ETFs, issuers are exploring every avenue to meet investor demand.
As the industry evolves, these products could significantly shape how retail and institutional investors gain exposure to the crypto market. However, navigating regulatory hurdles and educating investors will be crucial for their success.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Readers are encouraged to consult investment professionals before making financial decisions.
