SEC’s New Rules May Spur AltAlt ETFs Targeting Mid-Cap Cryptocurrencies

Tidal Financial Group has introduced a novel exchange-traded fund (ETF) concept termed the "AltAlt Season" Crypto ETF, designed to track the performance of cryptocurrencies excluding both Bitcoin (BTC) and Ethereum (ETH). This 2X leveraged product, part of a trio of filings with the U.S. Securities and Exchange Commission (SEC), aims to amplify daily returns of XRP and Solana (SOL), positioning itself in a niche segment of the crypto market. The term "AltAlt" distinguishes it from traditional "Alt" funds, which typically exclude only Bitcoin, by further filtering out Ethereum, thereby targeting mid- and smaller-cap altcoins.

The proposed fund reflects a growing trend of crypto ETF innovation, with issuers increasingly seeking to diversify exposure beyond Bitcoin and Ethereum. Tidal’s filings highlight the use of derivatives and indirect investments in crypto-based products, such as swap agreements or options on U.S.-listed spot crypto ETFs, to achieve its leveraged objectives. This approach mirrors structures used by existing leveraged crypto ETFs, including ProShares’ Bitcoin and Ethereum offerings, which rely on futures contracts rather than direct token holdings. The SEC’s recent adoption of generic listing standards for commodity-based trusts has streamlined the approval process, potentially accelerating the launch of such products.

The AltAlt Season ETF’s structure carries elevated risks due to its leveraged nature. The prospectus explicitly states that daily reinvestment of gains and losses could erode returns over time, particularly in volatile markets. This aligns with broader industry caution around leveraged ETFs, which require active management and are generally suited for experienced investors. Bloomberg Senior ETF Analyst Eric Balchunas noted the novelty of the product, quipping that while 2X Alt Season ETFs were notable, the 2X AltAlt Season concept was "a whole different story". Such commentary underscores the product’s experimental character within the crypto ETF landscape.

Regulatory developments have been pivotal in shaping the market for these products. The SEC’s delays in approving crypto ETF applications—such as Franklin Templeton’s Solana and XRP proposals—have created a backlog of over 90 applications as of late August. However, recent generic listing standards, which allow automated approvals for qualifying products, may mitigate these delays. Bloomberg ETF Research Analyst James Seyffart emphasized that the SEC’s tendency to take full statutory review periods suggests most decisions will materialize by October 2025. This timeline could facilitate a surge in approvals, including for AltAlt-like products, as issuers navigate the streamlined framework.

The launch of the AltAlt Season ETF is part of a broader institutional push to expand crypto investment vehicles. ProShares, a leader in crypto-linked ETFs, has already introduced 2X leveraged ETFs for Solana and XRP, which track futures contracts and do not hold tokens directly. These products, along with Tidal’s proposal, signal growing institutional confidence in the sector, despite regulatory uncertainties. Seyffart noted that while single-asset altcoin ETFs may struggle to replicate the success of Bitcoin and Ethereum funds, hybrid or basket-based ETFs could attract significant inflows. This perspective highlights the evolving dynamics of crypto adoption, where institutional capital increasingly favors diversified exposure over concentrated bets.

Source: [1] title1 (https://cryptonews.com/news/sec-postpones-franklin-solana-etf-ruling-by-60-days-to-november-14/) [2] title2 (https://blockonomi.com/sec-postpones-decisions-on-solana-and-xrp-etf-applications-from-franklin-templeton/) [3] title3 (https://thecurrencyanalytics.com/altcoins/xrp-solana-and-litecoin-etfs-face-sec-delays-until-october-2025-192113) [4] title4 (https://cryptoslate.com/sec-delays-5-crypto-etfs-analysts-expect-final-rulings-by-october/) [5] title5 (https://cointelegraph.com/news/sec-pushes-back-decisions-truth-social-solana-xrp-crypto-etfs) [6] title6 (https://decrypt.co/340488/altalt-season-crypto-etf-proposed-fund-skips-bitcoin-ethereum) [7] title7 (https://www.proshares.com/press-releases/proshares-launches-etfs-targeting-2x-daily-returns-of-solana-and-xrp) [8] title8 (https://thebitjournal.com/leveraged-crypto-etfs-2x-solana-xrp/) [9] title9 (https://cryptonews.com/news/wall-street-giant-proshares-launches-2x-leveraged-solana-and-xrp-etfs-institutions-coming/) [10] title10 (https://cryptoslate.com/proshares-debuts-2x-leveraged-daily-exposure-to-solana-and-xrp-in-new-etfs/) [11] title11 (https://coinpaper.com/10909/altcoin-et-fs-are-coming-but-don-t-expect-a-market-surge-yet) [12] title12 (https://www.sec.gov/Archives/edgar/data/1924868/000199937125013559/0001999371-25-013559-index.htm)