Altcoin ETFs: Uncertain Demand Despite Approval Hopes

Experts Question Whether Altcoin ETFs Will Attract Strong Demand

While asset managers remain optimistic, industry experts like Katalin Tischhauser and Bryan Armour argue that institutional investors may prefer broader crypto index funds over standalone altcoin ETFs. Despite this, firms like Grayscale and 21Shares are actively seeking approval for ETFs tied to Polkadot, Solana, and other altcoins. Meanwhile, market sentiment is cautious, and CryptoQuant's Ki Young Ju even suggests that an "altcoin season" as most people know it is unlikely to take place in 2025.

Altcoin ETFs Face Uncertain Demand

The introduction of exchange-traded funds (ETFs) holding alternative cryptocurrencies in the United States may not attract significant investor interest, despite multiple applications. While analysts expect regulatory approval for some of these ETFs in 2025, demand is expected to be much lower than that for Bitcoin and Ethereum ETFs.

A crypto ETF is a regulated investment vehicle that allows investors to gain exposure to cryptocurrencies without directly holding the underlying assets. These ETFs trade on traditional stock exchanges and track the price of a specific cryptocurrency or a basket of digital assets.

Investment analysts suggest that institutional investors, who were previously hesitant to invest in Bitcoin and Ethereum before the ETF structure was introduced, are unlikely to show the same level of interest in altcoin ETFs. Katalin Tischhauser, head of research at Sygnum, points out that the market excitement surrounding altcoin ETFs does not seem to be backed by clear evidence of strong demand. She estimates that inflows for altcoin ETFs may range from several hundred million to $1 billion, which is a stark contrast to the over $100 billion held by US Bitcoin ETFs.

Bryan Armour, the director of passive strategies research at morningstar, agrees with this assessment and believes that institutional investors are more likely to gain exposure to altcoins through index funds that passively track the broader cryptocurrency market rather than through standalone altcoin ETFs.

Recent developments in the crypto ETF space suggest a preference for more established assets. Franklin Templeton and Hashdex both launched crypto index ETFs that currently hold only Bitcoin and Ethereum, though they may