Crypto ETF Surge Could Reshape Market, but Many Products May Fail

A deluge of crypto exchange-traded funds (ETFs) could hit U.S. markets as early as this fall, potentially changing how both institutional and retail investors access the digital asset space. But while some see it as a turning point for mainstream adoption, others are already bracing for inevitable casualties.

“The crypto ETF floodgates are set to open this fall, and investors will soon be swimming in these products,” said Nate Geraci, president of NovaDius Wealth Management. He believes most of the 90-plus crypto ETF applications currently filed with the U.S. Securities and Exchange Commission (SEC) will be approved — assuming they meet the final listing requirements.

Ultimately, though, said Geraci, investors — not regulators — will decide which products thrive.

“The beautiful aspect of the ETF market is that it’s a meritocracy, where investors vote with their hard-earned money. The market naturally sorts out the winners from the losers, so I’m not overly concerned about there being too many crypto ETFs floating around.”

To Geraci, the demand for more diverse and accessible investment options is already there — and underappreciated.

“Given the initial response to futures-based and 1940 Act-structured Solana and XRP ETFs, I believe demand for 1933 Act spot products in these crypto assets is being severely underestimated – much like we saw with spot bitcoin and ether ETFs,” he said.

The iShares Bitcoin Trust (IBIT), managed and issued by BlackRock, became the most successful ETF launch in the history of those vehicles, now holding nearly $85 billion worth of bitcoin on behalf of investors.

While the ether ETFs initially saw much smaller demand than their bitcoin counterparts, a recent surge in interest in the Ethereum blockchain’s native token has seen inflows for the group well surpass those for bitcoin ETFs.

Ether ETFs have taken in nearly $10 billion since the start of July, which represents the bulk of total inflows of $14 billion since their launch last year, according to James Seyffart, an ETF analyst at Bloomberg Intelligence.

(Source: Bloomberg Intelligence/James Seyffart)

Geraci also anticipates strong uptake for index-based crypto ETFs, which he says will give investors and advisors “a straightforward way to gain exposure to the broader digital asset ecosystem.” For smaller, less-known tokens, he admits demand will depend heavily on the strength of each project’s fundamentals.

“As you move further down the crypto market cap spectrum, I expect demand for spot ETFs will be more closely tied to the success of individual projects and the performance of their underlying assets — factors that are difficult to forecast at this stage,” he said.

Seyffart agrees that the pipeline of crypto-related products is about to burst — but he’s more skeptical about how many will stick.

“If all of those filings ultimately launch, there will undoubtedly be some closures within the next few years,” Seyffart said. He expects “decent demand for plenty of these products,” but believes expectations need to be calibrated—especially for altcoins.

“I’m not sure that some of these longer tail altcoins will be able to have 5+ successful ETFs,” he said. “If people are gauging their success on the level of bitcoin ETFs — they will be severely disappointed. But if others are expecting all of them to fail — they will also be severely disappointed.”

In his view, the market is entering a test phase where issuers will throw many products at the wall to see what sticks. “These issuers are gonna launch a lot of products and try to find something that sticks,” Seyffart said. He predicts the next 12 to 18 months will see “hundreds of crypto-related ETP launches.”

Both analysts agree on a central point: the ETF format creates a highly competitive landscape where investor interest is the ultimate arbiter of success. While SEC approval might open the gates, it’s asset flows that will determine who stays afloat.

In the ETF world, product closures are a feature — not a flaw. Just like in the stock market, low demand or poor performance can lead funds to shut down. For investors, that means not every new crypto ETF will be worth betting on, even if it carries the name of a popular blockchain project.

For example, a Solana ETF might find buyers if the underlying token continues to attract developers and users. But five separate ETFs based on the same coin? That’s where both Seyffart and Geraci say the market will likely intervene.

“If demand doesn’t show up, those products will close,” Seyffart said.

Behind this boom is the broader institutional acceptance of crypto. Since the SEC approved spot bitcoin and ether ETFs last year, asset managers have rushed to file new offerings tied to Solana SOL$198.69, XRP, dogecoin DOGE$0.2147 and many others and even basket funds tracking multiple coins. These products give traditional investors a regulated way to access crypto markets without setting up wallets or managing private keys.

But with that access comes the responsibility to be discerning.

“In the end, investors will decide which products make sense and which don’t,” Geraci said. “That’s how the ETF market has always worked.”

And with hundreds of crypto funds potentially hitting the market soon, that decision may need to come quickly.

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