The approval of Ethereum's ETF, the world's second largest crypto, by US regulatory agency has sparked a wave of new product development in the emerging digital asset category for asset management companies. Just 48 hours later, ProShares submitted applications for six funds that will long or short Bitcoin or Ethereum. In addition, Hashdex is considering integrating these two tokens into an investment product, while VanEck plans to launch an ETF based on the fifth largest crypto Solana, despite facing many challenges.
This trend indicates that ETF products are exploring a series of innovative crypto tools. Although the US Securities and Exchange Commission may be cautious about this, Bitcoin funds have become one of the most inflow ETFs this year, even surpassing some well-known technology funds.
Roxanna Islam, industry research director at VettaFi, pointed out that ETFs are known for their innovation and issuers will be creative in the crypto area. Although the specific demand for these ETFs is not yet clear, as investors' interest in traditional spot crypto ETFs continues to grow, more crypto strategy applications are expected to emerge in an attempt to capture this wave of demand.
In the $9.4 trillion US ETF market, new funds are being launched more frequently. So far this year, more than 330 new funds have started trading, compared to about 500 for the entire previous year. However, in the fiercely competitive market, ETFs are also closing quickly, with more than 100 ETFs closed as of 2024, on par with the same period last year.
The successful launch of Bitcoin and Ethereum ETFs has exceeded the expectations of many analysts, with inflows far exceeding expectations. Since the establishment earlier this week, eight of the nine Ethereum ETFs have attracted inflows, with BlackRock and Bitwise's products both attracting more than $0.2 billion. Nevertheless, these ETFs and their underlying assets Ethereum fell on Thursday, with some market observers predicting a "buy the rumor, sell the fact" event.
Bitcoin funds have already netted $17.5 billion this year. The establishment of these ETFs, which have been in preparation for years, marks a softening of the US regulatory environment for digital assets and may encourage asset managers to be more innovative.
Athanasios Psarofagis of Bloomberg Industry Research says issuers are always looking for innovative ways to make money and they will continue to push the boundaries. Reverse and leveraged ETFs, which use derivatives to increase returns or pay returns that are opposite to those of certain stocks or indices, have been popular with retail investors over the past year, as they seize opportunities to double or triple returns, although this also comes with greater loss risks.
According to data from Bloomberg Industry Research, leveraged ETFs had cumulative inflows of approximately $9 billion as of 2024 and are expected to surpass last year's $10.2 billion. In particular, a leveraged Bitcoin ETF traded under the code BITX has attracted nearly $2 billion in funds this year, with a 50% increase.
The rise of crypto ETFs and the launch of innovative products not only reflect the growing interest in digital assets in the market, but also show how asset management companies use innovation to attract investors and meet market demand in the context of gradually opening regulatory environment.
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