How ETFs are reshaping the crypto markets

2024 has proved to be a breakout year for the cryptocurrency sector. In January, we saw the launch of Bitcoin spot ETFs in the United States. And six months later we're on the cusp of Ethereum spot ETFs hitting the markets. Cointelegraph caught up with a number of individuals directly involved in the launch of these investment products to find out where we're at. Six months later, that rebirth was wild.

And I was like, holy moly.

I thought they would be explosively popular.

I don't think anyone anticipated quite how much demand there would be.

The first couple days I think were on, on my prediction, they had a nice splash. A lot of times when a new product comes out, especially after one that's been hyped up, there's a big first splash day. First splash week. This was on par with what I thought.

It's funny because right before the launch we had published a research note from our Galaxy Research team, Alex Thorne and all of them. They had basically calculated what the expectation would be for flows. And I believe their estimates for that first year was about $14 billion. And we're basically already surpassed that. Within the last month we're at 15 billion. We still got half a year left at this point.

Then it died down a little. And then in about three weeks after it started to go up, it had this like Rebirth. I called the second wind. That's weird. Usually you have the splash, you come down and then maybe like down the road something happens and you get life. But it only took like a couple of weeks to get that. Rebirth. That rebirth was wild. They were taking in a billion net over GBTC outflows. So that's when the assets got to 60 billion in no time. And I was like, holy moly. So fast forward to where we are now. They've taken in $15 billion net. That's the magic number because it's XGBTC. 15 billion net is the top end of my prediction for the first year. So in half a year they are at the top of my range. So unless there's a massive sell off and people take their money out, which I don't think will happen, the sell off happens a little. Some people will take their money out, but not everybody. We're probably going to see way more than 15 billion by the end of the year. I could see that.

Not actually just about the US market, it's about the fact that once you remove this major risk of like, what is the US regulator going to do? About Bitcoin. It changes what the risk return profile of the asset is. And so it unblocked a lot of people's thinking around this and started making this disaster, making Bitcoin feel more compatible with existing infrastructure. And I think that's been really, really positive.

Capital inflows into Bitcoin spot ETFs in the United States strongly suggest that retail investors have a tremendous appetite for exposure to this asset class. But before the SEC approved these investment products, investment advisors could not offer their clients any products directly tied to physically held Bitcoin. This has fundamentally changed and now investors who otherwise wouldn't invest in Bitcoin have a means to dip their toes in into an asset that boasts unrivaled price appreciation.

Bitcoin to me seems like gold as a teenager. Second amount of money, Ethereum is more like a tech stock. If this is a portfolio. People have all this space here with like low cost index funds for Vanguard stocks, bonds, but they have a little slice for hot sauce. They want to have fun, they don't want to miss the boat on stuff. They want to cure future fomo. To me, the crypto is going to fit great in here because it is, it is volatile. But the good news is you can stomach your volatility if it's a small portion of portfolios. So to me, ETFs and Bitcoin share a lot in that disruptive disintermediation spirit. But the ETFs clearly are gonna do a lot of work simply because they are liquid, cheap, convenient. You know, if you put a. I remember when the Beatles went on itunes, you know, their record sales went up. Well, it's not like they made new records, they just got put on itunes. So I think there's a similar case here.

I actually think that question is posed in the wrong structure because it's not about who buys it. It's why I think there's two things people really undervalue. One is inheritance planning. It's really hard to inherit physical crypto. It is extremely painful. We are not set up for it. And if you get hit by a bus, that's not going to go well. If you have children or dependents, it's very difficult to recover, if not impossible if you haven't already planned for. And it's difficult from a tax reporting and compliance perspective. And it also can't be held in most, at least in the US most types of retirement accounts, securities can. And so it both addresses different pools of money and different problems. And by the way, I am Never going to be the platinum plates in your backyard person. I would rather have an ETF than that because I think for me from a long term perspective, an ETF is actually going to be more secure and easier to transfer over time, especially if I want to hold a position for 30 years. I think the stuff I keep in hot wallets is what I use to have fun and play with applications. And if it gets hacked, it doesn't, it's not going to do anything right.

Whether you have the older generation, the baby boomers, so to speak, and others participate in this space, they probably don't want to go through the hassle of a wallet. And so I think the ETFs, the Bitcoin ETF specifically, have created a fairly similar experience to owning spot Bitcoin. You know, you're, you're participating in the, in the gains there and really sort of that network effect of that broader participation of Bitcoin and certainly you have your group that never wants to sell your Maxis and that basically puts a.

Floor in Bitcoin ETFs have been trading for six months and a newcomer is soon to join the market. Ethereum spot ETFs have been given provisional clearance and a number of asset managers are expected to launch their products in weeks, not months. There's also a political element to consider. And as the United States presidential elections edge closer, there's not a lot we.

Could say just because we're in registration with Invesco for an Ethereum ETF ourselves. But the one thing, I mean, it really does seem apparent that there's been a shift on this. I mean, one day I don't think anybody was really talking about an Ethereum etf. And you just see suddenly in the news that Everybody's getting their 19 before is approved. That's really exciting. And it's hard not to notice that that's all coinciding with some of the shifts that's happening in Congress. So you had the vote on SAB 121 overturning the SEC accounting rule, even though that was veto for Biden. You had nine Democrats come along and vote for that, which was amazing. And then I think even More so with fit 21 the following week, having 71 Democrats join Republicans to vote for that, which basically creates a market infrastructure around cryptocurrencies, was just a huge show of support. And so all that coinciding, all I could say, what a great coincidence, but one that, you know, we're certainly happy about. We're going to work through that process with the sec, with our partners at Invesco as it relates to Ethereum etf. And you know, if and when the SEC does approve the prospectuses, you know, we'll be ready to trade.

Ethereum ETFs are now a question of when and not if. What remains to be seen is how these products will perform in relation to the record breaking performance of Bitcoin spot ETFs.

So in my opinion, that hot sauce bucket, if you're a normal person, and I know this because I live in the 6040 world, Bitcoin is like enough crypto hot sauce. You're like, you know, I'm good. These things move together. Anyway, I don't understand the Ethereum network. It's a little more complicated. Bitcoin is quote, digital gold. I got it. Ethereum is like harder to explain. In short. Now Matt Siegel from Vaneck just made the case on our panel that it can be pitched like a stock it actually produces. So there's cash flow and you might. And it's like an app store and there's. I think they'll get there. So I, but I just see it being a sidekick.

I think as an industry we are now taking the most successful launch in ETFs ever and using that as the benchmark for success. I think the idea that that is the standard is not realistic. I think it will be a successful ETF launch. I think it will do significantly better than the average etf. I think it will probably do in the top decile of ETF launches ever. I think people need to like seriously moderate what they think normal for an ETF launch is as part of this discussion. But I do think they will be very successful. I don't think they'll be as successful as Bitcoin.

Theory I think is going to be a little bit different. You've seen with some of the issuers take out any language about staking. And so staking is a big part of this, the Ethereum ecosystem and they'd be giving up that yield. I think for the investors that have the wherewithal, they might consider do I want an Ethereum etf? Do I really want to participate in the staking? You just might say I want access. I don't really care maybe about the staking parts. I don't really fully understand that yet. But let me try this. And like I said with the Bitcoin etf, maybe it's an invitation to understand more about the Ethereum ecosystem. In that case. It.