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GAUGING THE CRYPTO ETF FILING CRAZE

Digital assets had another great year in 2024, led by strength in bitcoin BTC= and ETF inflows, catalyzed further by the new administration.

However, given recent volatility the prospect of higher prices now appears a bit murky. At one point last week, BTC= was down nearly 30% from its January 20 record intraday high.

It's since seen a strong pop after President Trump said in a post on Truth Social that his January executive order on digital assets would create a stockpile of currencies, including bitcoin, ether, XRP, solana and cardano. The names had not previously been announced.

Bitcoin and ether will be at the heart of this reserve, he posted on Sunday.

That said, BTC= is still down more than 17% from its record high. Ethereum, the second largest cryptocurrency by market cap, is down more than 50% from its all-time high.

Meanwhile, in a note, Grant Engelbart, investment strategist at the Carson Group, is highlighting what he says is a crypto ETF filing craze.

"The latest crypto ETF development following the election has been a surge in applications for ETFs beyond Bitcoin and Ethereum (or in some cases variations) that range from reasonable to hopeful, to hail Mary," writes Engelbart.

He adds that there are at least 45 different applications for new ETFs since the new administration took office, and that these products include leverage, options, and are tracking digital assets "ranging from established (XRP, Solana, Cardano) to meme coins that have only recently been launched with near zero utility (Melania, BONK)."

As Engelbart sees it, more tools via the ETF wrapper are generally a good thing for investors. However, he also thinks that at a certain point they can become a risk.

Although the SEC went to great lengths to gauge liquidity, market manipulation potential, and security when analyzing bitcoin and ethereum ETFs, Engelbart says that many of these new proposed products have significantly lower liquidity, include futures trading, and have higher (typically offshore) exchange concentration than existing products, not to mention issues with security.

"This will bring new risks to the ETF wrapper in the US that we generally have not seen yet, should they get the green light," writes Engelbart.

(Terence Gabriel)

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