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Crypto ETFs may have a year of innovation with new funds and new approaches, but we don't expect demand to match what we saw in Bitcoin ETF's first year.
Bitcoin The exchange-traded fund debuted a year ago and was led by BlackRock's iShares Bitcoin Trust, which pulled in $36 billion in net new assets in its first year and was hailed as one of the most successful ETF launches in history. has been done. ETFs have become a catalyst for increased adoption by institutional investors, helping to double the total market value of cryptocurrencies by 2024.
However, demand for the next crypto ETF may decline. Applications are already being made for the new fund to be tracked. Solana, XRPHedera (HBAR), litecoin According to JPMorgan, even if approved this year, a portion of the assets flowing into Bitcoin ETFs could be collected. Applications are also being made for a Bitcoin and Ether hybrid fund.
“I don’t see the next wave of virtual currencies.” [exchange-traded product] We believe this launch makes sense for the cryptocurrency ecosystem, given that other tokens have much smaller market caps and far less investor interest,” said Kenneth Worthington, analyst at JPMorgan. wrote in a memo on Monday.
Worthington pointed out that Bitcoin ETFs' $108 billion in assets account for 6% of Bitcoin's market capitalization after one year of trading. In the case of the Ether ETF, which launched to much fanfare in July, that percentage has shrunk to just 3% ($12 billion) of the coin's market cap six months later.
Applying these “adoption rates” to Solana, which has a total market capitalization of $91 billion, JPMorgan projects that the ETFs associated with this token will attract between $3 billion and $6 billion in net new assets. There is. Funds tracking XRP, which has a market cap of $146 billion, will attract an estimated $4 billion and $8 billion in net new assets.
Worthington said the regulatory environment, particularly promises from a pro-crypto Congress and White House in 2025, when the industry expects to foster growth in crypto business, could shape the outlook for innovation in crypto ETFs. he added.
“U.S. regulatory and legislative guardrails will determine the type, quantity, and focus of new products and services launched,” the analyst said. “A new administration and a new SEC Chairman opens the door to new opportunities in crypto innovation.”
Tyrone Ross, founder and president of 401 Financial, a registered investment advisory firm, said he expects demand for Bitcoin ETFs to remain “healthy” this year, although not as strong as it was in 2024. This is primarily due to investor education and growing confidence in the 16-year-old digital asset class.
However, adoption could accelerate if Bitcoin ETFs are added to Wall Street portfolio models, he said.
“These portfolios don't have crypto in them, so until crypto is incorporated into them, we're not going to see the next growth this year like we saw last year,” Ross told CNBC. “The vast majority of advisors buy off-the-shelf models, and those models don’t include Bitcoin or cryptocurrencies. [exposure] Among them… I think once that's resolved you start to see that parabola [growth] Like I saw last year. ”
“While some of the regulatory clouds are clearing and blue skies are being felt across the universe, expectations for ETFs should be tempered next year,” he added.
