Regulators May Unlock Crypto's "ETPalooza" as ETP Rules Near Approval

The U.S. crypto market could experience a significant rally by year-end, according to Matt Hougan, Chief Investment Officer at Bitwise, as the Securities and Exchange Commission (SEC) moves forward with the adoption of generic listing standards for crypto exchange-traded products (ETPs). These proposed rules aim to streamline the approval process for new crypto ETPs, reducing the timeline from months to as little as 75 days. Hougan described the potential shift as a “coming of age” moment for crypto, with the potential to unlock a surge of new ETPs and bring the market closer to mainstream adoption.

Currently, each spot crypto ETP in the U.S. must undergo a lengthy, case-by-case approval process with no guaranteed outcome. Hougan highlighted how this regulatory bottleneck has held back innovation and institutional participation. Under the new framework, ETPs that meet predefined criteria—such as having a regulated futures market—would bypass this lengthy process. This change could see tokens like Solana, XRP, Avalanche, and Dogecoin gain ETP approval rapidly. Hougan referenced the 2019 “ETF Rule” for traditional ETFs, which tripled the number of ETF launches in the U.S., as a potential template for the crypto ETP market.

Bitwise has already taken steps to capitalize on these anticipated regulatory changes by filing for a spot Avalanche ETF. The fund, which will track the CME CF Avalanche-Dollar Reference Rate, is structured as a Delaware statutory trust and will be backed by AVAX tokens held in custody by Coinbase Custody. The firm’s move positions it alongside competitors like Grayscale and VanEck, who are also seeking to launch Avalanche products. Hougan emphasized that while ETPs themselves do not guarantee inflows, they significantly reduce the barrier to entry for traditional investors, making crypto more accessible and visible in brokerage accounts.

The proposed ETP rules also address key investor concerns, such as asset custody, transparency, and market integrity. For instance, the SEC’s July 2025 approval of in-kind creation and redemption mechanisms for crypto ETPs is expected to reduce costs and improve efficiency for both issuers and investors. This move allows institutional investors to defer capital gains until they choose to sell the underlying assets. Additionally, the SEC has shifted responsibility for determining ETP eligibility to the Commodity Futures Trading Commission (CFTC), which will assess whether a cryptocurrency has traded on a regulated futures market for at least six months.

However, Hougan cautioned that macroeconomic factors and fundamental demand for the underlying assets will still play a crucial role in driving the market. While the regulatory environment is improving, he noted that ETPs alone cannot sustain a rally unless there is strong interest in the tokens they track. For example, Ethereum ETFs initially struggled to attract significant inflows until interest in stablecoins and tokenized assets grew. Similarly, a Bitcoin Cash ETP would likely fail to gain traction unless the asset itself experiences renewed demand.

The SEC is expected to make key decisions on these proposals in the coming months, with the first wave of altcoin ETPs potentially hitting the market by year-end. If adopted, these changes could transform the crypto investment landscape, bringing increased liquidity, institutional capital, and product diversity. Hougan likened the potential surge in ETPs to an “ETPalooza,” drawing a comparison to the explosive growth seen in traditional ETFs following the 2019 rule changes. For now, the market remains in a state of anticipation, with both investors and regulators watching closely as the industry moves toward a new era of crypto investment.