Alts ETF Gold Rush: New Era of Encryption Investment Opportunities

On January 11, 2024, spot Bitcoin ETF began trading on Wall Street, marking a new era for cryptocurrency investment. In just 18 months, the market has undergone tremendous changes. Now, the U.S. Securities and Exchange Commission (SEC) is faced with 72 applications for encryption ETFs, covering a variety of digital assets from mainstream cryptocurrencies to meme coins.

This change reflects a significant transformation in the cryptocurrency market. From seeking recognition to everyone scrambling to get a piece of the pie, the development of crypto ETFs has been remarkable. The success of the Bitcoin ETF is particularly notable, having attracted $107 billion in a year and reaching an asset size of $133 billion after 18 months. This not only rewrites the script for asset management but also demonstrates the enormous demand for gaining exposure to crypto assets through traditional investment tools.

The rise of altcoin ETFs stems from the convergence of multiple factors. Improvements in the regulatory environment, institutional recognition of encryption currencies, and investors' demand for diversified encryption exposure have all contributed to this trend. However, the acceptance of altcoin ETFs is expected to differ from that of Bitcoin ETFs. Early analysis suggests that the total inflow for altcoin ETFs could be between hundreds of millions to 1 billion dollars, significantly lower than the achievements of Bitcoin ETFs.

The introduction of staking features has brought new opportunities for altcoin ETFs. The SEC's approval of staking allows ETFs to generate additional returns for investors by staking the assets they hold. This not only creates new revenue models for ETF issuers but also provides investors with a new value proposition. However, managing staked assets also introduces additional complexities and risks.

With a large number of ETF applications pouring in, cost compression has become an inevitable trend. Issuers may use staking rewards to subsidize management fees, or even launch zero or negative fee products to attract assets. While this competition benefits investors, it also puts pressure on the profitability of issuers.

The rise of altcoin ETFs is changing people's perceptions of encryption investment. Different cryptocurrencies are assigned different investment positions, ranging from speed type to payment type, to academically rigorous type, and even including meme coins. This diversification makes cryptocurrencies no longer a peculiar asset class, but rather a diversified investment option with different risk characteristics and use cases.

However, this development has also sparked some thoughts. We need to observe how alts ETF will differ from Ethereum ETF to avoid repeating the low adoption rate of the latter. At the same time, this trend of mainstreaming has also triggered discussions about the boundary between real value creation and speculative packaging.

Ultimately, the market will determine which products can stand out in this competitive field. Regardless, the rise of alts ETF undoubtedly marks the entry of cryptocurrency investment into a new era, providing investors with more choices and bringing new opportunities and challenges to the entire industry.