The development of cryptocurrency ETFs will profoundly impact the landscape of crypto investment.

Author: Hotcoin Research

I. Introduction

Trump's return to the White House, claiming he will make the U.S. the "crypto capital," raises the question: will the SEC open the floodgates for crypto ETFs? Bitcoin and Ethereum ETFs have successfully launched, attracting a significant influx of traditional financial capital. Popular candidate assets like SOL, XRP, ADA, and DOGE are eager to join the fray; who will become the next ETF star? The intertwining of policy relaxation and market uncertainty is making the future landscape of crypto ETFs increasingly opaque. This article will delve into regulatory changes and market trends, providing insights into the next steps for crypto ETFs!

II. Understanding ETFs and Their Approval Standards

1. What is an ETF?

An ETF (Exchange-Traded Fund) is an investment tool traded on stock exchanges, designed to track the performance of a specific index, industry, or asset class (such as gold, stock markets, 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 mutual funds, but ETFs can be bought and sold like stocks during trading days, offering greater flexibility.

Cryptocurrency ETFs serve as a bridge between the crypto world and traditional financial markets. ETFs enable investors to access cryptocurrencies conveniently through traditional securities accounts without the need to directly hold or manage digital wallets. This not only lowers the investment threshold but also enhances market liquidity and transparency.

2. Differences Between Spot ETFs and Futures ETFs

• Spot ETF: Directly holds the actual underlying assets it tracks. For example, a spot Bitcoin ETF (like iShares Bitcoin Trust IBIT) holds actual bitcoins, and its price reflects the current price of Bitcoin. Spot ETFs provide direct asset exposure, with prices closely aligned to the current market price, making them suitable for long-term holding.

• Futures ETF: Invests in futures contracts related to the underlying assets rather than directly holding the assets. For instance, a gold futures ETF holds gold futures contracts, and its performance is influenced by fluctuations in the futures market price, which may deviate from the current price due to premiums or discounts. Futures ETFs provide indirect exposure through derivatives, appealing to traders looking to capitalize on short-term price movements.

Futures ETFs primarily influence the market through contracts, while spot ETFs involve the buying and selling of actual assets, making their approval have a more direct impact on cryptocurrency prices, indicating broader sources of capital and demand. Therefore, the approval of spot ETFs reflects regulators' confidence in the maturity and integrity of the cryptocurrency spot market and promotes wider adoption. Consequently, market expectations for cryptocurrency ETFs are more about the anticipation of spot ETF approvals.

3. The SEC's ETF Approval Standards

As the gatekeeper for cryptocurrency ETFs, the U.S. SEC has strict requirements for approval standards, focusing on core concerns such as market manipulation risk, liquidity, and transparency.

• Market Manipulation Risk and Surveillance-Sharing Agreements: The SEC has historically been concerned about the susceptibility of the crypto spot market to manipulation, given that many exchanges operate outside the U.S. or lack regulation. If abnormal trading cannot be effectively monitored, ETFs could be used to manipulate market prices. To address this, the SEC requires exchanges to sign surveillance-sharing agreements with "regulated markets of scale" to obtain underlying market trading data, enabling timely detection and prevention of manipulative behavior.

• Asset Liquidity: The SEC is concerned whether the underlying assets of the ETF have sufficient market capitalization and trading volume to support the fund's creation and redemption without causing significant volatility. High liquidity means that a single large transaction has a limited impact on market prices, thereby reducing the difficulty of manipulation and tracking errors. For example, Bitcoin, as the highest market cap cryptocurrency, is traded around the clock across multiple exchanges, providing ample liquidity; in contrast, small-cap tokens are more easily controlled by capital, leading to extreme price fluctuations. Therefore, mainstream cryptocurrencies with high market capitalization and daily trading volume are more likely to meet the SEC's liquidity requirements.

• Transparency and Custody: ETFs need to have transparent and reliable pricing mechanisms and asset custody solutions. Regarding pricing, regulators prefer to reference composite indices made up of prices from multiple compliant exchanges to avoid data distortion from a single exchange. For custody, the crypto assets held by the ETF must be safeguarded by trusted custodians, employing security measures such as multi-signature and cold storage to prevent hacking and loss risks. In summary, the SEC expects applicants to submit comprehensive plans regarding market oversight, anti-fraud measures, and investor protection, demonstrating that the launch of the ETF will not harm market fairness and investor interests.

It is worth noting that the SEC's stance on crypto ETFs is not static but dynamically adjusts with market and regulatory environments. During Gary Gensler's chairmanship (2021-2023), the SEC repeatedly rejected applications for spot crypto ETFs, citing market manipulation and insufficient investor protection, including at least two proposals for Solana ETFs. However, after 2024, with changes in regulatory leadership and improved market conditions, the SEC began to reassess these standards, gradually accepting some crypto ETF applications under the premise of additional stringent monitoring measures. It can be said that while regulatory standards have never relaxed, the agency's judgment on when those standards are met is evolving.

III. Approval Process and Performance of Bitcoin and Ethereum ETFs

1. Bitcoin ETF

Source: https://www.coinglass.com/bitcoin-etf

Timeline for Bitcoin ETF approval:

• Early Attempts (Since 2013): The crypto industry began pushing for a Bitcoin ETF as early as 2013, with the Winklevoss Bitcoin Trust submitting the first application, but the SEC repeatedly rejected it on grounds of market manipulation and regulatory inadequacy. The Bitcoin futures ETF was approved in October 2021, while the spot ETF remained unapproved for a long time. However, the situation changed in 2023-2024, with several asset management giants submitting applications for spot Bitcoin ETFs, drawing significant market attention.

• Key Developments (2023-2024): In 2023, as firms like BlackRock submitted applications, market anticipation grew. In December 2023, the SEC approved the 19b-4 filings (exchange rule changes) from several institutions, marking a key step toward a spot Bitcoin ETF.

• Official Approval (January 2024): On January 10, 2024, the SEC officially approved the S-1 filings (registration statements) for 11 spot Bitcoin ETFs, which began trading on traditional stock exchanges like NASDAQ and NYSE on January 11.

The currently approved 11 spot Bitcoin ETFs include:

1. BlackRock iShares Bitcoin Trust (IBIT)

2. Grayscale Bitcoin Trust (GBTC)

3. Fidelity Wise Origin Bitcoin Fund (FBTC)

4. ARK 21Shares Bitcoin ETF (ARKB)

5. Bitwise Bitcoin ETF (BITB)

6. Invesco Galaxy Bitcoin ETF (BTCO)

7. Valkyrie Bitcoin Fund (BRRR)

8. Franklin Bitcoin ETF (EZBC)

9. WisdomTree Bitcoin Fund (BTCW)

10. VanEck Bitcoin Trust (HODL)

11. Hashdex Bitcoin ETF (DEFI)

As of March 11, 2025, the total net assets of the 11 spot Bitcoin ETFs are approximately $100 billion, having retreated from a peak of $125.7 billion on January 31. The top three are: IBIT (BlackRock) currently holding $46.3 billion, Fidelity (FBTC) currently holding $16.2 billion, and GBTC (Grayscale) currently holding $15.8 billion.

Source: https://www.coinglass.com/bitcoin-etf

2. Ethereum ETF

Source: https://www.coinglass.com/eth-etf

Timeline for Ethereum ETF approval:

• Initial Applications (Since 2023): Following the progress of Bitcoin ETFs, several institutions began submitting applications for spot Ethereum ETFs, drawing on the regulatory framework established for Bitcoin.

• Key Milestone (May 2024): On May 23, 2024, the SEC approved the 19b-4 filings from several exchanges, allowing for the launch of spot Ethereum ETFs.

• Official Approval (July 2024): On July 23, 2024, the SEC approved the relevant S-1 filings, officially allowing the listing of spot Ethereum ETFs. The time from 19b-4 approval to S-1 approval took about two months, slightly slower than for Bitcoin ETFs, possibly due to the complexities of the Ethereum market (such as staking-related controversies).

• Listing and Trading: The first batch of spot Ethereum ETFs launched on major U.S. exchanges at the end of July 2024.

Currently, the SEC has approved 9 spot Ethereum ETFs:

1. Grayscale Ethereum Trust (ETHE)

2. BlackRock iShares Ethereum Trust (ETHA)

3. Fidelity Ethereum Fund (FETH)

4. 21Shares Core Ethereum ETF (CETH)

5. VanEck Ethereum ETF (ETHV)

6. Bitwise Ethereum ETF (ETHW)

7. Invesco Galaxy Ethereum ETF (QETH)

8. Franklin Ethereum ETF (EZET)

9. WisdomTree Ethereum Fund (ETHF)

The scale of Ethereum ETFs is significantly lower than that of Bitcoin ETFs. As of March 11, 2025, the total capital of Ethereum ETFs is approximately $6 billion, with the two largest being: Grayscale's ETHE at about $2.5 billion and BlackRock's ETHA at about $2.4 billion.

IV. Analysis of the Approval Potential for Popular Cryptocurrency ETFs

With the successful approval of spot Bitcoin and Ethereum ETFs, the demand for ETFs of other assets in the cryptocurrency market is increasing. As of March 11, 2025, in addition to Bitcoin and Ethereum, several cryptocurrencies have submitted ETF applications to the SEC, including Ripple (XRP), Solana (SOL), Litecoin (LTC), Cardano (ADA), Hedera (HBAR), Polkadot (DOT), and Dogecoin (DOGE).

Here are the cryptocurrencies that have currently submitted ETF applications and their related information:

1. Ripple (XRP)

Ripple's ETF application was submitted by Bitwise, WisdomTree, Canary Capital, and 21Shares, with the first submission date in October 2024. Ripple has built a network called RippleNet, which allows banks and financial institutions to achieve fast and low-cost cross-border transfers, with XRP serving as a bridge currency to provide liquidity. Several major entities, including American Express, SBI, and Siam Commercial Bank, have tested or integrated XRP into their cross-border payment solutions. However, the legal dispute between Ripple and the SEC regarding whether XRP is a security may delay approval. In July 2023, the court partially dismissed the SEC's lawsuit, but the controversy remains. SEC internal analysts have also indicated that the likelihood of approving an XRP ETF is low until the Ripple case is resolved.

2. Solana (SOL)

Solana's ETF application was submitted by companies such as VanEck, 21Shares, Canary Capital, Bitwise, and Grayscale. Solana is widely regarded as one of the most promising cryptocurrencies to launch an ETF, given its market capitalization and influence. The meme coin frenzy surrounding Solana has attracted significant attention, but the meme craze has also led to scams, rug pulls, and bot attacks, raising concerns about its sustainability. The SEC classified SOL as one of the tokens suspected of being securities in 2023, and approval for its ETF still faces many uncertainties until the SEC clarifies its position or the industry enacts legislation.

3. Litecoin (LTC)

Litecoin's ETF application was submitted by Canary Capital and Grayscale, and it is generally viewed as a commodity rather than a security, making its approval prospects more optimistic. Litecoin was created in 2011 by former Google engineer Charlie Lee and is a clearly defined Bitcoin fork with commodity attributes. It is referred to as "digital silver," and thus, after BTC and ETH ETFs, it is "very likely" to become the next batch of ETF candidates. Bloomberg predicts a 90% chance of approval, with a potential listing in mid-July 2025.

4. Cardano (ADA)

Grayscale submitted a Cardano ETF application in February 2025, which the SEC has officially accepted. Cardano is developed under the leadership of Charles Hoskinson, a co-founder of Ethereum, and is a third-generation blockchain platform that emphasizes academic research and security, focusing on upgrading functionality through peer-reviewed research. The SEC has also classified ADA as a security. Cardano's network is often criticized for slow feature releases and has been mocked as a "ghost chain." According to DefiLlama data, as of March 12, Cardano's DeFi ecosystem TVL is only $340 million, ranking 18th.

5. Hedera (HBAR)

On March 12, Cointelegraph reported that the SEC has officially accepted Grayscale's application for a Hedera (HBAR) spot ETF. Hedera Hashgraph is based on a directed acyclic graph (DAG) structure, claiming to achieve high throughput and low latency. Hedera is governed by a council composed of many well-known companies, including Boeing, Google, and IBM, which jointly manage network node operations and decision-making. This governance model gives Hedera both enterprise-level application positioning and decentralized characteristics. Additionally, HBAR has not been classified as a security by the SEC. Some analysts believe that after the successful launch of Bitcoin and Ethereum ETFs, Litecoin and Hedera will be the next wave of ETF candidates.

6. Polkadot (DOT)

21Shares and Grayscale submitted Polkadot ETF applications in February 2025. Market interest has increased, but approval will still take time, and there has been no clear progress. Polkadot is a cross-chain blockchain platform initiated by Gavin Wood, a co-founder of Ethereum, aimed at solving interoperability issues within the blockchain ecosystem and is dubbed the "internet of blockchains." DOT was initially issued through an ICO, which places it in the potential securities category. However, the SEC did not name DOT in its 2023 enforcement list, which may indicate that it is not currently a priority target.

7. Dogecoin (DOGE)

Grayscale and Bitwise submitted a Dogecoin ETF application in early 2025, which the SEC has officially accepted. This is a very positive signal, as it shows that the SEC's attitude towards meme coin ETFs has become more open. The DOGE community is highly active on social media, often spontaneously organizing charitable and sponsorship activities, earning it a positive reputation. Especially since Elon Musk has publicly supported Dogecoin multiple times on Twitter since 2020, its attention and price have reached new highs. However, critics point out that DOGE lacks a clear use case and ongoing development, with excessive speculative elements.

V. Future Outlook: Which Cryptocurrencies Are Most Likely to Get ETF Approval?

Short-Term Outlook (2025-2026)

2025 is viewed by the industry as the "Year of Altcoin ETFs." With the successful launch of Bitcoin and Ethereum ETFs, regulatory agencies are gradually evaluating ETF applications for other crypto assets. Litecoin (LTC), due to its strong commodity attributes and low risk, is widely regarded as the most likely candidate to become the first approved non-Bitcoin/Ethereum ETF, with approval expected within 2025. Following closely may be Hedera (HBAR) and Solana (SOL). HBAR benefits from not being labeled as a security and has high enterprise recognition, making its approval probability relatively high. Although Solana has faced regulatory shadows, its large ecosystem and market demand make it a popular candidate, with an estimated approval probability of around 70%. Dogecoin (DOGE) should not be overlooked either; despite its "grassroots" origins, it has entered the race under new regulatory thinking, with some analyses giving it a solid 75% probability. However, whether DOGE can pass still depends on the SEC's tolerance for its market volatility. Regarding XRP, if Ripple wins or settles the lawsuit in 2025, we may see the SEC quickly approve one or more XRP ETF applications to align with market and legal changes. Projects like Cardano (ADA) and Polkadot (DOT), which have been troubled by ICO and securities controversies, may be slightly lower in the approval queue in the short term.

Optimistically, by the end of 2025, in addition to BTC and ETH, there may be 2-3 new cryptocurrency asset ETFs in the market (likely a combination of LTC, SOL, XRP, or HBAR). This will open a compliant door for investors to diversify their cryptocurrency asset allocations.

Long-Term Outlook (2027 and Beyond)

Looking further into the future (2027 and beyond), cryptocurrency ETFs are expected to flourish and have a profound impact on the entire financial market.

1. More second-tier crypto assets may enter the ETF space. In addition to the aforementioned cryptocurrencies, other projects with significant ecological value (such as Polygon, Avalanche, Cosmos, etc.) may also be included in the ETF candidate pool if they can prove their compliance and market maturity. As industry regulatory frameworks improve, the classification of crypto assets by agencies like the SEC will become clearer, determining which belong to "commodities" and which are "security tokens." This will clear legal obstacles for broader asset issuance of ETFs. It is foreseeable that by 2027, most of the top twenty mainstream cryptocurrencies by market capitalization will likely launch corresponding ETF products.

2. Innovative ETF strategies will be applied in the crypto space. For example, actively managed crypto ETFs (where fund managers adjust holdings based on market conditions), income-generating ETFs (holding stakable crypto assets and returning earnings to investors), and futures and derivatives ETFs (using futures and options to adjust exposure or hedge risks) may emerge. The launch of these products will depend on the maturity of the derivatives market and regulatory approvals. Concepts like Ethereum staking yield ETFs and Bitcoin options-enhanced yield ETFs are already being discussed in the industry. If approved, they will enrich investors' means of obtaining crypto returns and mark the entry of crypto asset management into a more refined era.

3. Global market interconnectivity will strengthen. The future crypto ETF market will not only unfold in the U.S.; if regulations in Europe, Asia, and other regions follow suit, ETF products approved in the U.S. may be listed in other countries and vice versa. Compliant ETFs launched by major global financial centers will gradually become an important part of price discovery, potentially influencing the pricing dominance of the spot market. In the long term, as trading volume shifts to compliant channels like ETFs, the previous disorder and susceptibility to manipulation in the crypto spot market may ease, leading to reduced market volatility and more efficient and credible price formation.

4. From the investor's perspective, crypto assets will become a regular component of asset allocation. As various types of crypto ETFs continue to emerge, investment advisors and institutional investors can more easily incorporate crypto assets into their portfolios to hedge against inflation, share in technological growth, or improve the Sharpe ratio. Ordinary investors will also find it commonplace to indirectly hold shares of some crypto asset ETFs through pensions and wealth management products. This means that the boundaries between the crypto market and traditional financial markets are becoming increasingly blurred, and the trends of crypto assets may become more closely linked to macroeconomic factors and traditional markets.

VI. Conclusion

As more institutions apply for cryptocurrency ETFs, Wall Street's interest is growing, indicating that crypto assets are gradually being accepted by mainstream finance. At the same time, the U.S. Securities and Exchange Commission (SEC) has also shifted its attitude towards crypto ETFs—from initial cautious rejection to loosening approval around 2024, and now with Trump promising to implement a series of favorable policies for cryptocurrencies during his second term. This marks that cryptocurrency ETFs may be on the brink of an explosion, and the cryptocurrency market is about to enter a new stage of development.

For ordinary investors, crypto ETFs are a "double-edged sword." On one hand, they lower the barriers to investing in crypto and reduce operational complexity, allowing investors who are not technically savvy to enter this emerging field with relatively low risk. Through ETFs, investors do not need to worry about losing private keys or exchange security issues; holding crypto assets becomes as simple as holding a stock. This helps investors achieve diversification in asset allocation and share in the growth dividends of the blockchain industry. On the other hand, the high volatility of the crypto market and policy uncertainties still exist, and the prices of ETFs will closely follow market fluctuations. 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 landscape of crypto investment. At this critical turning point, we have witnessed a shift in regulatory attitudes and the launch of the first products. Looking ahead, more diverse crypto ETFs will emerge, bringing digital assets into a broader financial world.

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