Nate Geraci, the head of the ETF Store, presented five bold predictions about the cryptocurrency exchange-traded fund (ETF) market in 2025.
Sharing his insights on X (formerly Twitter), Geraci highlighted important developments that could shape the market. Let's analyze his predictions and their potential impact.
Geraci's Cryptocurrency ETF Predictions... A Busy Year Ahead for Legal Teams
Geraci pointed out the massive workload that ETF legal teams will face in 2025. He reflected the views of Franklin Templeton's digital asset head.
"ETF legal staff will be busy at the start of the year." - Geraci shared.
As the cryptocurrency ETF space is poised for rapid growth, Geraci shared five developments that are expected to make headlines.
Spot BTC ETH ETF Launches
Geraci anticipates that the launch of a combined spot Bitcoin and Ethereum ETF is imminent, following recent regulatory milestones. According to BeInCrypto, the SEC has recently paved the way for the launch of this financial product by approving dual Bitcoin and Ethereum ETFs for Hashdex and Franklin Templeton.
This combined ETF will drive broader investor participation and simplify cryptocurrency exposure within a single product. Retrospectively, ETF analyst Eric Balchunas lent credibility to Geraci's optimism by predicting a January 2025 launch.
"The launch is likely to happen in January. It will be around an 80/20 BTC/ETH market cap ratio. The fact that Hashdex and Frankie are first is noteworthy. Good for them." - Balchunas shared in December.
Spot ETH ETF Options Trading
Building on the momentum of Bitcoin spot ETF options trading, Geraci predicts the emergence of Ethereum spot ETF options in 2025. The OCC's recent approval of Bitcoin ETF options trading has already set the stage for such developments.
BlackRock's Bitcoin ETF options recorded over $425 million in sales on their first trading day, showcasing impressive performance. Similarly, Grayscale's Bitcoin ETF options were launched in the market on November 21st. These advancements suggest that the inclusion of Ethereum is just a matter of time.
Spot BTC & ETH ETF In-Kind Creation
The introduction of in-kind creation and redemption mechanisms for spot BTC and ETH ETFs is another milestone Geraci anticipates. This follows the SEC's groundbreaking approval of cash creation redemption for Bitcoin ETFs in January and ETH ETFs in May.
The in-kind mechanism is expected to enhance liquidity, reduce costs, and make ETFs more attractive to institutional investors. Retrospectively, the debate between cash and in-kind creation was heated as applicants campaigned for Bitcoin ETF approval by the end of 2023. The US SEC had encouraged ETFs to use cash creation instead of in-kind to avoid the use of unregistered brokers.
"The SEC insisted on cash creation for Bitcoin ETFs, as they were concerned about money laundering through in-kind creation (which is a much more closed system)." - Balchunas mentioned.
However, in-kind creation is considered better for investors due to spread and tax implications. It is seen as the cleanest structure for issuers and end investors, while cash redemption forces ETF providers to hold cash equivalents backing the ETF.
"If 100 ETF shares are equal to 1 BTC, the ETF provider must always hold the cash equivalent of 1 BTC. This creates a much harder problem." - A user explained on X.
It is understandable that issuers still tend to push for in-kind creation, as it is considered better in terms of taxes and spreads.
Spot ETH ETF Staking
While the US SEC under Gary Gensler's leadership dislikes the staking function for ETH ETFs, Geraci predicts that this restriction may be changed. Initially, major players like BlackRock and Fidelity gave up on staking functionality to secure the SEC's approval.
However, the European market has already embraced staking ETPs, with products like Bitwise's Solana staking ETP gaining popularity. Under a crypto-friendly administration, the regulatory barriers could be lifted, making ETH ETF staking a reality.
Spot SOL ETF Approval
Geraci's final prediction focuses on the approval of a spot Solana ETF. While the SEC has halted new applications for Solana ETFs, the possibility could increase if the regulatory stance shifts under a Trump administration. Trump's pro-cryptocurrency stance is emphasized by industry experts, suggesting a more favorable environment for new ETF products.
"The biggest win for Solana under a new Trump presidency would be the long-awaited ETF, likely in 2025 or 2026. Unsurprisingly, the excellent VanEck team will lead it, with the support of 21Shares and Canary Capital." - Dan Jablonski, Head of News and Research at Syndica
As the cryptocurrency ETF ecosystem evolves, Geraci's predictions present a transformative era for digital asset investments. The convergence of regulatory developments, institutional interest, and the introduction of new products will cement cryptocurrency ETFs as the cornerstone of the 2025 financial landscape.
