Bitcoin exchange-traded funds (ETFs) set new records in 2024, but can they replicate their success in the year ahead.

Table of Contents

Introduction

The approval and launch of spot Bitcoin exchange-traded funds (ETFs) in the US were among the most anticipated financial products of recent years. As 2024 closed, the $129 billion in total net assets held by the ETFs suggests that 2025 will be even more groundbreaking.

What are Exchange-Traded Funds (ETFs)?

ETFs are financial products that reflect the value of their underlying assets. Regulated, transparent, and highly liquid, they provide investors with access to assets they might otherwise be unable or unwilling to hold directly. This format is especially appealing for cryptocurrencies, as it offers a regulated, widely accessible, tax-efficient investment option.

A Brief History of Spot Bitcoin ETFs

Since 2013, the US Securities and Exchange Commission (SEC) has consistently rejected all spot Bitcoin ETF applications. Firms such as VanEck, WisdomTree, Bitwise, ARK Invest, 21Shares, and Grayscale faced repeated refusals.

In 2021, the SEC approved futures-based Bitcoin ETFs, with ProShares’ BITO being the first to launch. Initially a success, it reached $1 billion in assets within just two days. However, investors’ interest in BITO declined quickly, with its assets under management (AUM) dropping from a peak of $1.4 billion to $500 million within a year.

This plunge corresponded with the broader crypto market crash but also reflected the limitations of such a product. Futures-based ETFs, while allowing their holders to profit from Bitcoin price movements, lack the efficiency of spot ETFs, which hold actual BTC. Furthermore, spot ETFs create immediate buying or selling pressure, directly influencing Bitcoin’s price and liquidity.

The Success of Spot Bitcoin ETFs

In the world of ETFs, the spot Bitcoin ETFs quickly became a phenomenon. From the outset, the nine new ETFs (excluding Grayscale and Hashdex) shattered many industry records, generating $2.2 billion in trading volume on the first day, with the iShares Bitcoin Trust ETF (IBIT) alone accounting for $1 billion.

According to Bloomberg Intelligence, IBIT and other spot Bitcoin ETFs have attracted over $120 billion in net assets as of December 2024. This is a significant milestone, considering that some of these ETFs were launched less than a year ago.

Comparison with Gold

The success of spot Bitcoin ETFs has also led to comparisons with gold, a traditional safe-haven asset. As noted by Bloomberg’s Balchunas, the net assets in spot Bitcoin ETFs have caught up to those of gold in just one year. This is an impressive achievement, considering that gold has been around for centuries.

The Rise of Spot Ether ETFs

Ether (ETH), the second-largest cryptocurrency by market capitalization, entered the ETF space with the launch of its first dedicated spot ETFs in July 2024. However, their performance was more subdued compared to Bitcoin’s. Starting with $8.8 billion from the Grayscale Ethereum Trust, their total AUM grew modestly to $11 billion by year-end, according to The Block.

This shows that Bitcoin’s ‘digital gold’ narrative remains more attractive than Ether’s ‘world computer,’ and most investors likely need more convincing of Web3’s potential.

Will More Crypto ETFs Launch in 2025?

The start of 2025 shows that interest in spot Bitcoin ETFs remains strong, even amid a market correction. According to Farside, the ETFs have already attracted $1.1 billion in net inflows year-to-date. As Bitcoin continues to gain recognition in political and financial circles, this momentum could persist and maybe even expand to other cryptocurrencies.

For instance, the possibility of a spot Solana (SOL) ETF has become a hot topic in the crypto community — so much so that Polymarket users now assign a 74% probability of an SOL ETF being approved in 2025. The chances of an XRP ETF are estimated at 70%. VanEck, 21Shares, and Canary Capital have already filed for such ETFs.

Additionally, some Bitcoin detractors could reconsider their stance in 2025. Vanguard, one of the world’s largest investment management firms, has so far resisted entering the crypto game. However, the narrative could shift following the departure of its outspoken anti-Bitcoin CEO Tim Buckley and the arrival of former BlackRock executive Salim Ramji last summer.

Should Vanguard, a $9 trillion giant with a vast trading platform, launch a crypto ETF, it could significantly boost the market.

Conclusion

The rise of spot Bitcoin ETFs has been nothing short of remarkable. From their early struggles to overcome regulatory hurdles to their current status as some of the most popular financial products in the world, these ETFs have proven themselves to be a game-changer for investors and the cryptocurrency market as a whole.

As we move into 2025, it will be interesting to see how this trend continues. Will more crypto ETFs launch, and will they attract even more investors? Only time will tell, but one thing is certain: the spot Bitcoin ETFs have revolutionized the way people invest in cryptocurrencies, and their impact will be felt for years to come.

References

"The Rise of Spot Bitcoin Exchange-Traded Funds (ETFs)" by Bloomberg Intelligence
"Spot Ether ETFs: A Modest Success" by The Block
"Will More Crypto ETFs Launch in 2025?" by Farside
"Polymarket Users Assign 74% Probability to Solana ETF Approval" by CoinDesk

"US Bitcoin ETFs First Anniversary: A Surge Far Above Expectations"
"The Future of Cryptocurrency Investing: Trends and Predictions for 2025"

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