The Rise of the Altcoin ETF Gold Rush

Preface

In January 2024, the spot Bitcoin ETF began trading on Wall Street. Just six months later, the spot Ethereum ETF also made its debut. Fast forward eighteen months, and the desks of regulators are piled high with 72 crypto ETF applications, a number that continues to grow.

From Solana to Dogecoin, XRP, and even PENGU, asset management companies are competing to package various digital assets into regulated products. Analysts have raised the approval probability of most applications to 90% or higher, indicating that we are about to witness the largest expansion of crypto investment products in history.

Compared to 2024, there have been huge changes in the situation in 2025. From previously struggling hard to gain recognition, now everyone wants to get a piece of the pie.

the astonishing success of Bitcoin ETF

To understand the importance of altcoin ETFs, it is first necessary to recognize that the success of spot Bitcoin ETFs has far exceeded expectations. They have completely transformed the landscape of asset management.

In just one year, the Bitcoin ETF has absorbed $107 billion, setting the highest record in ETF issuance history. After 18 months, its asset scale has reached $133 billion.

A major asset management company's Bitcoin ETF holds over $74 billion worth of 694,400 Bitcoins. All ETFs combined control 1.23 million Bitcoins, accounting for about 6.2% of the total circulating supply.

As a Bitcoin ETF accumulates $70 billion in assets at an unprecedented speed, it proves that the demand for gaining exposure to crypto assets through traditional investment tools is real, huge, and still largely untapped. Institutions, retail investors, almost everyone is lining up to participate.

This success has created a positive feedback loop: as ETFs absorb Bitcoin supply, exchange trading balances decrease, institutional holdings accelerate, Bitcoin price stability is enhanced, and the entire cryptocurrency market gains unprecedented legitimacy. Even during periods of market volatility, institutional funds continue to flow in. These investors are not short-term speculators, but rather pension funds, family offices, and sovereign wealth funds that view Bitcoin as a legitimate asset class.

It is this unprecedented success that has led to approximately 72 altcoin ETF applications waiting for approval from regulators as of April.

The unique advantages of ETF

Although investors can purchase alts directly on cryptocurrency exchanges, ETFs still have their unique advantages. The core value of ETFs lies in bringing mainstream recognition to cryptocurrencies. Achieving ETF status is an important milestone for cryptocurrencies.

This legitimacy allows them to exist on traditional stock exchanges under existing financial regulations. Crypto ETFs enable investors to buy and sell digital assets like trading stocks through regular brokerage accounts.

For most retail investors who are not familiar with how cryptocurrencies operate, this is an ideal choice. They do not need to set up wallets, protect private keys, or deal with the technical details of the blockchain. Even if they overcome the barrier of wallets, risks still exist, such as hacking, loss of private keys, and exchange crashes. The custody and security of ETFs are managed on behalf of the investors, providing highly liquid assets that can be traded on mainstream traditional exchanges.

altcoin ETF application boom

The current application situation reveals future development trends. Several major institutions have submitted applications for the Solana ETF, with a high approval probability of 90%. Nine independent issuing institutions also hope to participate in the competition for SOL.

The XRP application follows closely, with multiple applications targeting this payment-focused cryptocurrency. The ETFs for Cardano, Litecoin, and Avalanche are also under review.

Even meme coins are no exception. The main issuers have submitted ETF applications for Dogecoin and PENGU.

The occurrence of all this is the result of the convergence of multiple forces, creating a perfect environment for the surge of alts ETF. The policy attitude towards cryptocurrencies has become more friendly, the new regulatory chairman has abolished the previous "regulation through enforcement" approach, and a cryptocurrency task force has been established to formulate clear rules.

Regulators recently clarified that "protocol staking activities" do not constitute a securities issuance, which is in stark contrast to the previous government's aggressive accountability towards staking providers.

The recognition of Bitcoin and alts by institutions, combined with the trend of corporate cryptocurrency reserves and research showing that 56% of financial advisors are now willing to allocate to crypto assets, has created an unprecedented demand for diversified crypto exposure beyond Bitcoin and Ethereum.

Economic reality

Although Bitcoin ETFs have proven there is significant institutional demand, early analysis suggests that the acceptance of alts ETFs will be markedly different.

Some researchers predict that the total inflow of alts ETFs will reach "hundreds of millions to 1 billion dollars," far below Bitcoin's achievement of 107 billion dollars. Even the most optimistic estimates suggest that the total inflow of alts ETFs is less than 1% of Bitcoin's achievements.

Ethereum's performance further highlights this gap. Despite being the second largest cryptocurrency, its ETF has attracted only about $4 billion in net inflows over 231 trading days, just 3% of Bitcoin's achievement of $133.3 billion. Even with an additional $1 billion inflow in the last 15 trading days, Ethereum's institutional appeal still lags far behind Bitcoin, indicating that alts ETFs face a more daunting challenge in attracting investor attention.

Bitcoin benefits from first-mover advantage, regulatory clarity, and the institutionally understandable "digital gold" narrative. Now, 72 applications are chasing a market that may only support a few winners.

Staking: The game changer in the rules.

A major difference between altcoin ETFs and Bitcoin ETFs is: earning income through staking. The approval of staking by regulatory agencies has opened the door for ETFs to stake their held assets and distribute the earnings to investors.

The annualized yield for Ethereum staking is currently between 2.5% and 2.7%. After deducting ETF fees and operating costs, investors may receive a net yield of 1.9% to 2.2%. Staking for Solana also offers similar opportunities.

This creates a new revenue model for ETF issuers and provides investors with a new value proposition. Staking ETFs no longer just offer price exposure, but become income-generating assets that can justify their fees while providing passive income.

Several Solana ETF applications explicitly include staking provisions, with issuers planning to stake 50-70% of their holdings while retaining liquidity reserves. However, staking will increase the complexity of operations.

ETF managers managing staked crypto assets face multiple challenges: they must balance maintaining enough un-staked and liquid assets to meet investor redemption demands while staking as much as possible to maximize returns. They also need to manage the "forfeiture" risk, which can lead to capital loss if validators make mistakes or violate rules.

Fee Compression Trend

A large number of applications almost guarantees a compression of fees. When 72 products compete for limited institutional funds, pricing becomes a major differentiating factor. Traditional cryptocurrency ETFs charge management fees of 0.15-1.5%, but competition may reduce these fees.

Some issuers may even use staking rewards to subsidize management fees, launching zero-fee or negative-fee products to attract assets. This trend has already appeared in the Canadian market, with several Solana ETFs waiving management fees in the initial phase.

This fee compression benefits investors, but it has also put pressure on the profitability of issuers. Only the largest and most efficient operators will survive the inevitable consolidation. Mergers, bankruptcies, and transformations are expected.

Conclusion

The craze for altcoin ETFs is changing people's views on crypto investments. Different cryptocurrencies are assigned different investment positions: Solana has become a speed-focused investment, XRP a payment-oriented investment, Cardano markets itself with "academic rigor," and even Dogecoin is seen as a symbol of mainstream adoption.

This diversification reflects the maturity of the cryptocurrency market. It is no longer a singular exotic asset class but has evolved into dozens of investment options with different risk characteristics and use cases. Bitcoin has become an extension of many traditional portfolios, while other cryptocurrencies provide investors with more diversified choices.

However, this also raises a question: has this mainstreaming truly created value, or has it merely packaged speculation into a form recognized by regulators? The answer may vary from person to person. Asset management companies see a new source of income, while investors gain a more convenient channel for cryptocurrency investments.

Ultimately, the market will decide which products can succeed and which will be eliminated. This gold rush of altcoin ETFs has not only changed the landscape of cryptocurrency investment but also marks a significant step towards a more mature and mainstream direction for the industry.