Crypto ETFs: The Bridge to DeFi
As we step into 2025, the crypto industry is poised for innovation, and exchange-traded funds (ETFs) will remain a vital part of the digital asset story. While other trends like tokenization and energy-crypto intersection may dominate headlines, ETFs will continue to grow, serving as a bridge between traditional finance (TradFi) and decentralized finance (DeFi) for advisors, retail investors, and institutional investors.
A Look Back at 2024
Last year, ETFs saw significant growth, with over $1 trillion in net inflows. The iShares Bitcoin Trust (IBIT) stood out, ranking third in inflows with $37.2 billion, behind only broad large-cap U.S. ETFs. IBIT now boasts $52.7 billion in assets, surpassing the iShares Gold Trust (IAU). The Fidelity Wise Origin Bitcoin Fund (FBTC) has become Fidelity’s largest ETF by assets, with over $19.6 billion.
New Launches and Trends
In 2024, 43 crypto ETFs were launched, including conversions, with over half of the universe debuting last year. Spot ETFs, particularly bitcoin and Ether, dominated the launches, while leveraged ETFs, option income ETFs, and hedged equity ETFs also made an appearance. Five single-stock Microstrategy (MSTR) ETFs were also introduced.
What to Expect in 2025
Looking ahead, several ETF filings are in various stages of approval. With a new crypto-friendly U.S. administration, issuers are eager to launch new products. Three key areas to watch include:
- More Spot ETFs: Expect filings for spot ETFs beyond bitcoin and Ether, such as Solana and XRP ETFs.
- Innovative Packaging: Filings for crypto index ETFs (multi-token funds) will continue, offering balanced exposure to various digital assets.
- Everything Else: Unique ETFs, such as ESG Bitcoin ETFs, corporate treasury ETFs, and convertible securities ETFs, will emerge.
Expert Insights
Griffin Kelly from The Daily Upside shares his thoughts on the global ETF industry, noting that while the U.S. dominates the market, ETFs are gaining traction in Asia Pacific and Europe. He predicts that ETFs will surpass mutual funds as the dominant investment vehicle in the next decade.
Kelly also discusses the impact of America’s approval of bitcoin and Ether ETFs, which has changed the game globally. The U.S. has become a leader in spot ETFs, with the iShares Bitcoin Trust ETF boasting over $53 billion in net assets. The incoming administration’s pro-crypto stance is expected to make issuing and accessing crypto ETFs easier, potentially leading to ETFs tracking smaller cryptocurrencies like Dogecoin.
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