By Paul R. La Monica

Spot Bitcoin exchange-traded funds marked their first anniversary not long ago. ETFs for ethereum, the world's second-most valuable cryptocurrency, have been trading now for roughly six months.

So, with the inauguration of pro-crypto Donald Trump just days away, are more crypto funds on the way?

Probably, in no small part because of the president-elect's support of digital assets -- specifically Bitcoin, according to both funds and crypto experts.

Trump's very public backing has helped push ETFs with crypto investments higher, pointed out Nicholas Elward, head of institutional product and ETFs at Natixis Investment Managers.

"As a result, all signs point toward more positive developments for cryptocurrency ETFs in 2025," Elward wrote in a note.

Crypto experts predict a wave of new spot ETFs, which own actual cryptos -- not crypto futures.

Four asset management firms -- 21Shares, Bitwise, WisdomTree, and Canary Capital -- have already filed paperwork with the Securities and Exchange Commission to list ETFs that own XRP, a digital asset that is hot these days. Several firms have also filed with the SEC to launch ETFs tied to the less well-known cryptos Solana, Hedera, and Litecoin.

"The momentum we're seeing with Bitcoin and Ethereum ETFs is just the tip of the iceberg," Dom Harz, co-founder of BOB, a blockchain network firm, told Barron's.

For Harz, "there are regulatory hurdles to overcome" before XRP and Solana ETFs are approved. But "we will see increased movement towards single-asset ETFs across the board in 2025, especially for well known tokens with strong brands."

Crypto ETFs offer exposure to the volatile tokens without owning them, Harz added, which is" perfect for people engaging with crypto assets for the first time."

The SEC didn't respond to requests for comment on whether more crypto ETFs are coming.

But Wall Street firmly believes it's a matter of when, not if.

SEC Chair Gary Gensler, who has been crypto's sheriff, will step down on Monday -- Inauguration Day. Trump's nominee to succeed Gensler, Paul Atkins, has argued that the SEC has been too strict on crypto.

Analysts at JPMorgan attribute the prospect of a "more crypto-friendly" SEC chair to "an incremental optimism for more crypto [ETFs] to be approved."

Still, the JPMorgan team warns that interest in funds offering second and third-tier cryptos may not be as robust as it has been for spot Bitcoin and Ethereum funds.

The iShares Bitcoin Trust has more than $45 billion in assets while the Grayscale Ethereum Trust ETF leads the ETH ETF pack with about $4.6 billion in assets.

Bitcoin funds, according to the JPMorgan analysts, have more than $100 billion in assets while Ethereum ETFs have $12 billion. But they estimate that Solana ETFs may attract only $3 billion to $6 billion in net new assets while XRP funds may get only $4 billion to $8 billion in investments.

"We don't see a next wave of cryptocurrency [ETF] launches as being meaningful for the cryptoecosystem given much smaller market capitalization of other tokens and far lower investor interest," the JPMorgan analysts wrote.

Harz agrees that demand may be more limited.

"While there may be an uptick in ETFs, Bitcoin and Ethereum will remain the dominant ecosystems," he told Barron's.

Yet, there may be other ways for investors to capitalize on the crypto ETF trend.

The JPMorgan analysts noted that leading crypto trading firm and custodian Coinbase, iShares owner BlackRock and market maker Virtu "were obvious beneficiaries" last year.

Don't be surprised if they are winners this year if the SEC signs off on more crypto ETFs.

Write to Paul R. La Monica at paul.lamonica@barrons.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

January 15, 2025 13:24 ET (18:24 GMT)

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