The approval of ether exchange-traded funds came swiftly after the launch of bitcoin ETFs, fueling speculation that other digital asset ETFs might soon follow.
In a recent webinar, Dave Lavalle, Global Head of ETFs at Grayscale, said that there have been massive inflows into bitcoin and ether ETFs that have quickly made digital assets a cornerstone of many portfolios.
Lavalle also said that digital asset ETFs are just starting to gain momentum. A Solana ETF has already been proposed and is awaiting regulatory approval. U.S. Lawmakers recently delayed their decision on the Hashdex Nasdaq Crypto Index ETF. The fund gives investors the ability to buy multiple cryptocurrencies at once based on the coins’ weighting in the Nasdaq Crypto U.S. Index.
“Asset managers, issuers, and other financial institutions are noticing the magnitude of these inflows and are realizing it’s a money-making gold mine through fees,” said Joel Hugentobler, Cryptocurrency Analyst at Javelin Strategy & Research. “These regulated ETFs have really helped to solidify the industry.”
Impacting the Ecosystem
Crypto ETFs have stabilized the crypto industry because some of the largest financial institutions in the world, like Blackrock, Fidelity, and Grayscale are backing them. So far, however, the nascent ETFs haven’t had the widescale impact on the digital assets ecosystem that some in the crypto community hoped for.
“Prior to the ETFs, typically inflows will come into bitcoin and some of the other top market cap tokens and trickle down into other ecosystems where most of the building and innovation is taking place,” Hugentobler said. “That is still likely to happen, but if billions of dollars are locked up in spot ETFs, there’s no way for those funds to feed the ecosystem and promote growth.”
Increasing Demand
It might take time for the crypto industry to feel the full effects of the launch, but the ETF approvals were almost universally hailed as a win for the crypto community. The approval of ether ETFs was particularly surprising given previous challenges from the U.S. Securities and Exchange Commission.
“ETFs will likely continue to be approved, and at an accelerated pace, particularly when Gary Gensler is no longer SEC chairman,” Hugentobler said. “Overall, it brings attention to the industry as a legitimate asset class. This should help light a fire under regulatory representatives to make decisions and move the ball forward on rolling out a legitimate regulatory framework.”