The gold rush of alts ETF

How 72 applications are reshaping Crypto Assets investment beyond Bitcoin?

Written by: Thejaswini MA

Compiled by: Block unicorn

Introduction

January 2024 feels like another era. It has only been eighteen months, but it seems very far away in retrospect. For Crypto Assets, it is an epic like “The Bridge on the River Kwai.”

On January 11, 2024, the spot Bitcoin ETF began trading on Wall Street. Approximately six months later, on July 23, 2024, the spot Ethereum ETF made its debut. Fast forward eighteen months later, the desk of the U.S. Securities and Exchange Commission (SEC) is piled high with applications—72 crypto ETF applications and counting.

From Solana to Dogecoin, Ripple (XRP), and even PENGU, asset management companies are competing to package every conceivable digital asset into regulated products. Bloomberg analysts Eric Balchunas and James Seyffart have raised the approval probability of most applications to “90% or higher,” indicating that we are about to witness the largest expansion of crypto asset investment products in history.

The year 2024 is completely different from the current year 2025. Back then, it was a tough struggle for recognition, now everyone wants a share of the pie.

Bitcoin’s 107 billion dollar wealth

To understand why altcoin ETFs are important, one must first recognize that the success of spot Bitcoin ETFs has far exceeded expectations. They have rewritten the entire script of asset management.

In one year, Bitcoin ETF attracted 107 billion dollars, becoming the most successful ETF issuance in history — 18 months later, the asset size reached 133 billion dollars.

Only BlackRock’s IBIT holds over $74 billion worth of 694,400 Bitcoins. All ETFs combined control 1.23 million Bitcoins - approximately 6.2% of the total circulation.

What does it prove when BlackRock’s Bitcoin ETF accumulates $70 billion in assets at a faster pace than any fund in history? The demand for exposure to crypto assets through traditional investment tools is real, huge, and not fully tapped. Institutions, retail investors, almost everyone is lining up.

This success has created a feedback loop, demonstrating the concept that as ETFs draw down Bitcoin supply, exchange-traded balances decrease. Institutional holdings are accelerating. Bitcoin price stability is improving. The entire Crypto Assets market is gaining unprecedented legitimacy. Even during market volatility, institutional funds continue to flow in. These are not day traders or retail speculators, but pension funds, family offices, and sovereign wealth funds that view Bitcoin as a legitimate asset class.

It is this success that has led to about 72 altcoin applications queuing up at the SEC as of April.

Why do we need ETFs?

You can buy altcoins on crypto exchanges, so what is the use of ETFs? The core of market operation lies in mainstream recognition. The status of ETFs is a milestone for crypto assets.

This legitimacy allows them to exist on traditional stock exchanges under existing financial regulations. Crypto ETFs enable investors to buy and sell digital assets like trading stocks through regular brokerage accounts.

For most retail investors who do not understand how Crypto Assets operate, this is a savior. There is no need to set up wallets, protect private keys, or deal with the technical details of the blockchain. Even if you overcome the wallet barrier, risks still exist — hacker attacks, loss of private keys, and exchange crashes. The custody and security of the ETF are managed on behalf of the investors, providing high liquidity assets traded on mainstream traditional exchanges.

Altcoin Gold Rush

These applications reveal the development prospects for the future. Major institutions such as VanEck, Grayscale, Bitwise, and Franklin Templeton have submitted applications for a Solana ETF, with an approval rate of up to 90%. Nine independent issuers also hope to participate in the competition for SOL, including the newly established institution Invesco Galaxy, which has proposed the ticker symbol QSOL.

Ripple (XRP) applications are following closely, with multiple applications targeting this payment-focused crypto asset. ETFs for Cardano, Litecoin, and Avalanche are also under review.

Even meme coins are no exception. The main issuing institutions have submitted ETFs for Dogecoin and PENGU.

“I am surprised that we have not yet seen an application for the Fartcoin ETF,” said Eric Balchunas of Bloomberg on X.

Why is all this happening now? It is the result of multiple forces converging, creating the perfect environment for the surge of altcoin ETFs. The friendly attitude of the Trump administration towards Crypto Assets marks a dramatic shift in regulation, as the new SEC chairman Paul Atkins has abolished Gary Gensler’s “regulation by enforcement” approach and established a crypto task force to formulate clear rules.

The climax of this regulatory thaw is the SEC’s recent clarification that “staking activities” do not constitute a securities offering—this stands in stark contrast to the previous government’s aggressive crackdown on staking providers like Kraken and Coinbase.

The institutional recognition of Bitcoin and altcoins, combined with the surge in corporate cryptocurrency reserves and Bitwise research showing that 56% of financial advisors are now willing to allocate to crypto assets, has created unprecedented demand for diversified crypto exposure beyond Bitcoin and Ethereum.

Economic Reality Test

Although Bitcoin ETFs have demonstrated a significant institutional demand, early analysis indicates that the acceptance of altcoin ETFs will be markedly different.

Sygnum Bank’s Head of Research Katalin Tischhauser expects that the total inflows for altcoin ETFs will reach “hundreds of millions to 1 billion dollars”—far below Bitcoin’s achievement of 107 billion dollars.

Even with the most optimistic estimates, the total inflow of altcoin ETFs is less than 1% of Bitcoin’s achievements. Fundamentally, this makes economic sense.

The performance of Ethereum further highlights this gap. Although Ethereum is the second largest Crypto Asset, its ETF has only attracted about 4 billion dollars in net inflows over 231 trading days—just 3% of Bitcoin’s achievement of 133.3 billion dollars. Even with an additional 1 billion dollars in inflows over the last 15 trading days, Ethereum’s institutional appeal still lags far behind Bitcoin, indicating that altcoin ETFs face a more daunting challenge in attracting investor attention.

Bitcoin benefits from first-mover advantage, regulatory clarity, and the narrative of “digital gold” that is easy for institutions to understand.

Now, 72 applications are chasing a market that may only support a few winners.

Staking Changes the Game

One difference between altcoin ETFs and Bitcoin ETFs is: earning returns through staking. The approval of staking by the U.S. Securities and Exchange Commission (SEC) has opened the door for ETFs to stake their held assets and distribute returns to investors.

The annualized yield for Ethereum staking is currently between 2.5% and 2.7%. After deducting ETF fees and operating costs, investors may achieve a net yield of 1.9% to 2.2%—which is not considered high by traditional fixed income standards, but it holds significant meaning when combined with potential price appreciation.

Staking on Solana also provides similar opportunities.

This creates a new revenue model for ETF issuers and offers investors a new value proposition. Staking ETFs no longer provide just price exposure, but become income-generating assets that can justify their fees while providing passive income.

Several applications for Solana ETFs explicitly include staking provisions, with issuers planning to stake 50-70% of their holdings while retaining liquidity reserves. Invesco Galaxy’s Solana ETF application specifically mentions using “trusted staking providers” to generate additional returns. However, staking will increase the complexity of operations.

ETF managers managing staked Crypto Assets face multiple challenges: they must balance maintaining sufficient unstaked and liquid assets to meet investor redemption demands while staking as much as possible to maximize returns. They also need to manage the risk of “slashing,” which can lead to fund losses if validators (nodes that help secure the network) make mistakes or violate rules. Running a validator requires technical expertise and reliable infrastructure to ensure everything runs smoothly and securely. Therefore, this is not an easy risk to manage. Managing staked assets in a Crypto ETF is a complex balancing act. While it is not impossible, the operational difficulty is significant.

For the approved and launched Bitcoin and Ethereum ETFs, staking is not an option, as the SEC led by Gary Gensler believes that staking violates securities laws and constitutes an unregistered securities offering. The situation is no longer the same now.

Fee Compression is Coming Soon

The large number of applications almost guarantees a compression of fees. When 72 products compete for limited institutional funds, pricing becomes a major differentiating factor. Traditional Crypto Assets ETFs charge management fees of 0.15-1.5%, but competition may lower these fees.

Some issuers may even use staking rewards to subsidize management fees, launching zero-fee or negative-fee products to attract assets. The Canadian market provides a precedent: several Solana ETFs waived management fees in the initial phase.

This fee compression benefits investors but also puts pressure on the profitability of issuers. Only the largest and most efficient operators can survive in the inevitable consolidation. As the market sifts through winners and losers, mergers, bankruptcies, and transformations are expected.

Our Viewpoint

The craze for altcoin ETFs is changing people’s perceptions of crypto investment.

Bitcoin ETF has achieved great success. Ethereum ETF provides a second option, but its adoption rate is lukewarm due to complexity and disappointing returns. Now, asset management companies believe that different crypto assets have different uses.

Solana has become a speed-oriented investment, XRP has become a payment-oriented investment, and Cardano is marketed with “academic rigor” as its selling point. Even Dogecoin is seen as a story of mainstream adoption. If you are building an investment portfolio, this makes sense. Crypto Assets are no longer a strange asset class, but have become dozens of investments with different risk characteristics and use cases.

Bitcoin is the largest Crypto Assets by market capitalization and has become an extension of traditional portfolios for many ordinary investors who have participated in the stock market. For these investors, Bitcoin is seen as a supplementary asset class that offers diversification and a hedge against market uncertainty. In contrast, Ethereum has not achieved the same level of mainstream integration. Despite being the second largest Crypto Assets, most retail and institutional investors do not view Ethereum ETFs as a core part of their portfolios.

We need to observe what differences the altcoin ETF will provide to avoid repeating the mistakes of the Ethereum ETF.

But this also shows the degree to which Crypto Assets have deviated from their roots. When meme coins receive ETF applications, when 72 products compete for attention, and when fees are compressed like other commodity businesses, you are witnessing the complete mainstreaming of an industry.

The question is whether this actually creates real value or merely packages speculation into a shell recognized by regulators. This may depend on your perspective. Asset management companies see new revenue sources in a crowded market. Investors gain easy exposure to crypto through familiar products.

The market will determine who is right.