By Suzanne McGee
(Reuters) – What a difference one year makes.
Fast-forward to early January 2024, and the asset management industry has been anxiously watching whether the long-awaited debut of US spot exchange-traded funds can live up to expectations that it will attract as much as $30 billion in its first year.
Today, those publishers open the champagne.
That first wave of bitcoin ETFs attracted a whopping $65 billion in 2024, helping the price of bitcoin rise from $43,000 to more than $100,000. The largest of these new products, the BlackRock (NYSE: ) iShares Trust, became the most successful debut in the ETF industry’s 35-year history.
But that’s just the beginning of the fun, cryptocurrency enthusiasts believe.
Shortly after those products celebrate their first anniversary on January 10, President-elect Donald Trump – who has promised to be the crypto president – will be sworn in for a second term, igniting what crypto enthusiasts believe will be a new golden era for the digital asset class .
Applications for new, and often new, crypto products are already piling up in regulators’ inboxes.
“Everyone is now aware of how much money can be made, and with new, friendly management, there’s no reason not to submit your best ideas to regulators,” said Joe McCann, founder and CEO of digital asset hedge fund Asymmetric in Miami.
While Gary Gensler, Biden’s crypto-skeptic chairman of the Securities and Exchange Commission, was forced to approve the first spot bitcoin ETFs — and similar ethereum products — after losing a court case, he continued to warn that cryptocurrencies are highly volatile and fraught with fraud and manipulation. .
Paul Atkins, Trump’s designated successor to Gensler, is widely regarded as a proponent of digital assets.
Since late November, firms including VanEck, 21Shares and Canary Capital have capitalized on that expectation of an increasingly crypto-friendly tone in Washington by filing at least 16 applications to launch exchange-traded products that track crypto indices or tokens such as XRP, according to SEC filings and industrial sources.
ANY REGULATION IS EXPECTED
The push to launch the next wave of cryptocurrencies began in earnest weeks before the election, with many in the industry expecting a lighter regulatory touch regardless of whether Trump or his rival, Vice President Kamala Harris, wins.
“Because it takes several months to get regulatory approvals and bring ETFs to market, many issuers began betting that the climate would be different this year and wanted to queue up their products ready to go,” said Matthew Sigel. , head of digital asset research at VanEck, who hopes to launch the Solana ETF in 2025.
Along with XRP and Solana, which are the fourth and sixth largest coins by market capitalization, according to CoinGeck, Canary has filed to launch products related to HBAR, the less widely distributed coin, according to SEC filings.
“The last piece of the puzzle was to see who the new SEC chairman would be — that’s what we were counting on,” said Steven McClurg, who led the launch of Valkyrie Bitcoin Fund in January and launched new crypto asset manager Canary Capital in October . “Now it’s off to the races,” he added.
However, the looming gold rush for crypto ETFs is not just products tied to individual coins. New derivative products are poised to make their debut days after Trump’s inauguration, and new types of multi-asset or hybrid products are waiting at the door.
Several issuers, including Calamos Investments, Innovator ETFs and First Trust, have filed for new funds that would use recently launched bitcoin options ETFs to protect investors against losses on bitcoin itself. Publishers say the first of these products will be unveiled on January 22.
Late last year, the SEC approved options for some of the bitcoin ETFs, including BlackRock’s iShares Bitcoin Trust, and gave CBOE Global Markets the green light to launch options tied to the Cboe Bitcoin US ETF Index — paving the way for this series of new ETFs.
Federico Brokate, head of U.S. operations for digital asset manager 21Shares, which has launched U.S. bitcoin and ethereum ETFs, along with a broader range of offerings in Europe, predicted that other new products could include listed funds linked to baskets of cryptocurrencies or that track a mix of alternative assets, such as bitcoin and gold.
“Product innovation in the U.S. is just getting started,” he said.
To be sure, such new products are still a gamble.
While bitcoin ETFs outperformed, ETFs launched in July tied to the world’s second-largest token, ether, attracted relatively modest inflows of $12.8 billion, according to Paris-based TrackInsight. While the price of bitcoin more than doubled in 2024, ether lagged that pace, gaining 53%.
Because smaller coins are still in their infancy, the factors driving returns and volatility aren’t always clear, said Todd Sohn, ETF analyst at brokerage Strategas.
While bitcoin and ethereum futures and futures-based ETFs have been traded in the US for several years, so far these are the only coins for which there is a futures market. Sohn said the existence of futures trading gave regulators confidence in the breadth and depth of bitcoin and ether.
It also remains to be seen how quickly Atkins will embrace the latest of the proposed products, given not only the potential risks, but also the long-running debate over whether these tokens are securities within the SEC’s purview.
Still, that regulatory uncertainty isn’t dampening the enthusiasm of the crypto asset management industry.
“The only limit to product emergence will be human creativity,” VanEck’s Sigel said.
