Author: Hotcoin Research
I. Introduction
Trump's return to the White House, vowing to make America the "Crypto Capital", does this mean that the SEC will give the green light to Altcoin ETFs? BTC and ETH ETFs have successfully launched, attracting a large amount of traditional financial capital. Hot candidate assets like SOL, XRP, ADA, and DOGE are eager to try, who will become the next ETF star? Policy relaxation and market uncertainty are intertwined, the future of Altcoin ETFs is becoming increasingly unclear. This article will delve into the changes in regulations and market trends, and give you an insight into the next step of Altcoin ETFs!
II. Understanding ETFs and their Approval Standards
1. What is an ETF?
ETF (Exchange Traded Fund) is an investment tool traded on stock exchanges, aiming to track the performance of a specific index, industry or asset class (such as gold, stock market or Cryptocurrencies). It allows investors to gain exposure to a portfolio of related assets by purchasing ETF shares, without directly holding each asset. This investment method is similar to a mutual fund, but ETFs can be bought and sold like stocks during trading days, providing higher flexibility.
Altcoin ETFs are the bridge connecting the Crypto world and the traditional financial market. ETFs can allow investors to conveniently access Cryptocurrencies through traditional securities accounts, without the need to directly hold or manage digital wallets. This will not only lower the investment threshold, but also improve market liquidity and transparency.
2. Difference between Spot ETFs and Futures ETFs
Spot ETFs: Directly hold the actual underlying assets they track. For example, a Spot BTC ETF (such as iShares Bitcoin Trust IBIT) holds actual BTC, and its price reflects the spot price of BTC. Spot ETFs provide direct asset exposure, with prices closer to the spot price, suitable for long-term holding.
Futures ETFs: Invest in futures contracts related to the underlying assets, rather than directly holding the assets. For example, a Gold Futures ETF holds Gold futures contracts, and its performance is affected by the fluctuations in the futures market, which may deviate from the spot price due to contango or backwardation. Futures ETFs provide indirect exposure through derivatives, and can better attract traders who want to capitalize on short-term price movements.
Futures ETFs mainly influence the market through contracts, while Spot ETFs involve the actual buying and selling of assets, and therefore their approval has a more direct impact on Cryptocurrency prices, implying a wider source of capital and demand. Therefore, the approval of Spot ETFs indicates that the regulatory authorities have more confidence in the maturity and completeness of the Cryptocurrency spot market, and promotes broader adoption. Therefore, the market's expectations for Altcoin ETFs are more reflected in the anticipation of Spot ETF approvals.
3. SEC's ETF Approval Standards in the US
As the gatekeeper for Altcoin ETFs, the US SEC has strict requirements for the approval standards, with a core focus on market manipulation risk, liquidity and transparency.
Market Manipulation Risk and Surveillance Sharing Agreements: The SEC has long been concerned that the Crypto spot market is susceptible to manipulation, as many exchanges are located outside the US or lack regulation. If abnormal trading activities cannot be effectively monitored, the ETF may be used to manipulate market prices. To this end, the SEC requires exchanges to sign Surveillance Sharing Agreements with "Significant Regulated Markets", in order to obtain trading data from the underlying market and timely detect and prevent manipulation.
Asset Liquidity: The SEC is concerned whether the ETF's underlying assets have sufficient market capitalization and trading volume to support the fund's subscriptions and redemptions without causing severe volatility. High liquidity means that a single large transaction has limited impact on market prices, thereby reducing the difficulty of manipulation and tracking error. For example, BTC as the Cryptocurrency with the highest market capitalization, trades around the clock across multiple exchanges globally, with ample liquidity; in comparison, low-cap tokens are more easily controlled by capital and subject to sharp price swings. Therefore, top-ranked, high-volume mainstream coins are more likely to meet the SEC's liquidity requirements.
Transparency and Custody: ETFs require a transparent and reliable pricing mechanism and asset custody solution. For pricing, the regulatory authorities prefer to reference a composite index composed of prices from multiple compliant exchanges, avoiding data distortion from a single exchange. For custody, the Crypto assets held by the ETF need to be safeguarded by a trusted custodian, using measures such as multi-signature and cold storage, to mitigate hacking and loss risks. In general, the SEC hopes to see applicants submit adequate plans in market oversight, anti-fraud, and investor protection, to prove that the launch of the ETF will not harm market fairness and investor interests.
It is worth noting that the SEC's attitude towards Altcoin ETFs is not static, but dynamically adjusts with the market and regulatory environment. During Gary Gensler's tenure as chairman (2021-2023), the SEC repeatedly rejected Spot Altcoin ETF applications on the grounds of market manipulation and insufficient investor protection, including at least two Solana ETF proposals. However, after 2024, with changes in regulatory leadership and improved market conditions, the SEC began to re-evaluate these standards and gradually accept certain Altcoin ETF applications, subject to more stringent monitoring measures. It can be said that the regulatory standards have never been relaxed, but the regulatory authorities' judgment on when the standards are met is evolving.
III. The Approval Process and Performance of BTC and ETH ETFs
1. BTC ETFs
Source:https://www.coinglass.com/bitcoin-etf
BTC ETF Approval Timeline:
Early Attempts (since 2013): The Crypto industry started pushing for BTC ETFs as early as 2013, such as the Winklevoss BTC Trust, but the SEC rejected the applications multiple times, citing market manipulation and lack of regulation. BTC Futures ETFs were approved in October 2021, while Spot ETFs remained elusive for a long time. However, the situation improved in 2023-2024, with multiple asset management giants submitting Spot BTC ETF applications, generating high market attention.
Key Developments (2023-2024): In 2023, as firms like BlackRock filed applications, market anticipation heated up. In December 2023, the SEC approved multiple institutions' 19b-4 filings (exchange rule changes), a key step towards Spot BTC ETFs.
Official Approval (January 2024): On January 10, 2024, the SEC officially approved the S-1 filings (registration statements) of 11 Spot BTC ETFs, which started trading on NASDAQ, NYSE, and other traditional stock exchanges on January 11.
The 11 approved Spot BTC ETFs include:
BlackRock iShares Bitcoin Trust (IBIT)
Grayscale Bitcoin Trust (GBTC)
Fidelity Wise Origin Bitcoin Fund (FBTC)
ARK 21Shares Bitcoin ETF (ARKB)
Bitwise Bitcoin ETF (BITB)
Invesco Galaxy Bitcoin ETF (BTCO)
Valkyrie Bitcoin Fund (BRRR)
Franklin Bitcoin ETF (EZBC)
WisdomTree Bitcoin Fund (BTCW)
VanEck Bitcoin Trust (HODL)
Hashdex Bitcoin ETF (DEFI)
As of March 11, 2025, the total net asset value of the 11 Spot BTC ETFs is around $100 billion, down from the peak of $125.7 billion on January 31. The top three are: IBIT (BlackRock) currently holding $46.3 billion, FBTC (Fidelity) holding $16.2 billion, and GBTC (Grayscale) holding $15.8 billion.
Source:https://www.coinglass.com/bitcoin-etf
2. ETH ETFs
Source:https://www.coinglass.com/eth-etf
ETH ETF Approval Timeline:
Initial Applications (since 2023): After the progress of BTC ETFs, multiple institutions started submitting Spot ETH ETF applications, leveraging the regulatory framework established for BTC.
Key Milestone (May 2024): On May 23, 2024, the SEC approved the 19b-4 filings of multiple exchanges, allowing the launch of spot ETFs.
Official Approval (July 2024): On July 23, 2024, the SEC approved the relevant S-1 filings, officially allowing the listing of spot ETFs. The time from 19b-4 approval to S-1 approval was about 2 months, slightly slower than ETFs, which may be related to the complexity of the market (such as controversies around ).
Listing and Trading: The first batch of spot ETFs went live on major US exchanges in late July 2024.
IV. Potential Analysis of Popular Cryptocurrency ETF Approvals
With the successful approval of and spot ETFs, the crypto market's demand for ETFs of other assets is increasing. As of March 11, 2025, in addition to and , multiple cryptocurrencies have submitted ETF applications to the SEC, including (XRP), (SOL), (LTC), (ADA), (HBAR), (DOT), and (DOGE). The cryptocurrencies that have currently submitted ETF applications and their relevant information are as follows: 1. (XRP) 2. (SOL) 3. (LTC) 4. (ADA) 5. (HBAR) 6. (DOT) 7. (DOGE)V. Future Outlook: Which Cryptocurrencies are Most Likely to Obtain ETF Approval?
Near-term Outlook (2025-2026)
2025 is seen as the "Year of ETFs" in the industry. With the successful launch of and ETFs, regulators are gradually evaluating ETF applications for other crypto assets. (LTC) is widely believed to be the most likely to be the first non-/ ETF to be approved, due to its strong commodity attributes and low risk, and is expected to be approved within 2025. Closely following may be (HBAR) and (SOL). has the advantage of not being labeled as a security, and its high corporate recognition, making it more likely to be approved. Although has faced regulatory shadows in the past, its massive ecosystem and market demand make it a hot candidate, with an estimated approval probability around 70%. (DOGE) cannot be ignored either, as it has entered the race under the new regulatory mindset, and some analyses even give it a respectable 75% probability. However, whether DOGE can pass will also depend on the SEC's tolerance for its market volatility. For (XRP), if the Ripple lawsuit is won or settled in 2025, we may see the SEC quickly approve one or more XRP ETF applications to align with the changes in the market and the law. (ADA) and (DOT) may be slightly lower in the approval queue in the short term, as they have been plagued by ICO and securities controversies. Optimistically, by the end of 2025, in addition to and , the market may see 2-3 new crypto asset ETFs (likely a combination of , , or ). This will open a compliant door for investors to diversify their crypto asset allocations.Long-term Outlook (2027 and beyond)
Looking further into the future (2027 and beyond), crypto currency ETFs are expected to flourish across the board and have a profound impact on the entire financial market.1. More second-tier Altcoins may join the ETF ranks. In addition to the aforementioned cryptocurrencies analyzed, other projects with significant ecosystem value (such as Polygon, Avalanche, Cosmos, etc.) may also be included in ETF targets if they can prove their compliance and market maturity. As the industry's regulatory framework is improved, institutions such as the SEC will have a clearer classification of Cryptocurrencies, determining which are "commodities" and which are "security tokens". This will clear the legal obstacles for a wider range of assets to issue ETFs. It can be foreseen that by 2027, most of the top 20 Cryptocurrencies by market capitalization will likely have corresponding ETF products.
2. Innovative ETF strategies will be applied in the Crypto field. For example, actively managed Crypto ETFs (where fund managers adjust their holdings based on market conditions), yield-generating ETFs (holding Cryptocurrencies that can be staked and earning yields to be returned to investors), futures and derivatives ETFs (using futures, options to increase, decrease positions or hedge risks), etc. may emerge. The launch of these products depends on the maturity of the derivatives market and regulatory approvals. Ideas such as an Ethereum staking yield ETF and a Bitcoin options-enhanced yield ETF are already being discussed in the industry. If approved, they will enrich the means for investors to obtain Crypto returns and mark the era of refined Crypto asset management.
3. Global market integration will be strengthened. In the future, the Crypto ETF market will not only unfold in the US, but if regulators in Europe, Asia and other regions follow suit, ETF products approved in the US may be cross-listed in other countries, and vice versa. The compliant ETFs launched by the world's major financial centers will gradually become an important part of price discovery, and may even influence the pricing power of the spot market. In the long run, as trading volume shifts to compliant channels like ETFs, the past disorder and manipulability of the Crypto spot market may be alleviated, and market volatility is expected to decrease, with prices forming more efficiently and credibly.
4. From the investor's perspective, Cryptocurrencies will become a regular component of asset allocation. If various types of Crypto ETFs continue to emerge, investment advisors and institutional investors can more conveniently incorporate Crypto assets into their portfolios to hedge against inflation, share in tech growth, or improve the Sharpe ratio. It will also become commonplace for retail investors to indirectly hold some Crypto ETF shares through pension funds and wealth management products. This means that the boundaries between the Crypto market and the traditional financial market will become increasingly blurred, and the performance of Cryptocurrencies may be more closely linked to macroeconomic and traditional market dynamics.
VI. Conclusion
As more and more institutions apply for Cryptocurrency ETFs, Wall Street's interest is growing, indicating that Cryptocurrencies are gradually being accepted by the mainstream financial sector. At the same time, the attitude of the US Securities and Exchange Commission (SEC) towards Crypto ETFs has also undergone a transformation - from the initial cautious rejection, to the loosening of approvals around 2024, and then to Trump's promise to implement a series of policies favorable to Cryptocurrencies in his second term, this signals that Cryptocurrency ETFs may be on the verge of a breakthrough, and the Cryptocurrency market is about to enter a new stage of development.
For ordinary investors, Crypto ETFs are a "double-edged sword". On the one hand, it lowers the threshold and operational complexity of investing in Cryptocurrencies, allowing investors who are not tech-savvy to participate in this emerging field with relatively low risk. Through ETFs, investors do not need to worry about issues such as private key loss and exchange security, and holding Cryptocurrencies is as simple as holding a stock. This helps investors achieve diversified asset allocation and share the dividends of the blockchain industry's growth. On the other hand, the high volatility of the Crypto market and policy uncertainties still exist, and the price of ETFs will closely follow the ups and downs of the market. Investors participating in such products still need to do their homework and understand the characteristics and risk factors of the underlying assets.
In summary, the development of Cryptocurrency ETFs will profoundly impact the Crypto investment landscape. At this critical turning point, we are witnessing the transformation of regulatory attitudes and the launch of the first batch of products. Looking to the future, more diverse Crypto ETFs will emerge, bringing digital assets into a broader financial world.
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