The race to attract investors to the cryptocurrency market is heating up as exchange-traded fund (ETF) providers seek increasingly innovative – and sometimes risky – ways to capitalize on the growing crypto craze.
In a flurry of activity as 2024 drew to a close, numerous ETF proposals were filed with the US Securities and Exchange Commission (SEC). Among the most notable filings was ProShares’ plan to create an ETF that denominates the S&P 500’s returns in Bitcoin. Other proposals included funds from Strive Asset Management and Rex Shares that would provide exposure to convertible bonds issued by companies purchasing Bitcoin. Additionally, Volatility Shares proposed creating inverse and leveraged Solana funds alongside a vehicle tracking the sixth-largest digital token through futures contracts.
“This is the continued evolution of launches to incorporate crypto strategies into ETFs. We’ll see a lot of these in 2025,” remarked Athanasios Psarofagis, an ETF analyst at Bloomberg Intelligence. “It’s the hot thing – issuers love to strike when the theme is hot. We’ll see crypto everything.”
If approved, these filings could bring over a dozen new crypto-focused ETFs to market in 2025, marking a significant expansion just a year after the debut of the first-ever US Bitcoin ETFs.
The past year proved to be a stellar one for cryptocurrency, with Bitcoin—the world’s largest digital asset—soaring by more than 120% to surpass the $100,000 milestone. Much of this growth stemmed from optimism surrounding the incoming administration of President-elect Donald Trump, who has signaled support for the industry. Many market analysts believe his policies could lead to a more favorable regulatory environment, spurring further growth in the crypto space.
This optimism helped drive significant inflows into the largest Bitcoin ETF, managed by BlackRock, which reported annual inflows exceeding $37 billion—ranking as the third-highest among all funds, according to Bloomberg data.
MicroStrategy, a company known for its aggressive Bitcoin investments, continued its strategy of bolstering reserves with cryptocurrency. Co-founder Michael Saylor has relied on a mix of equity issuance and convertible bond sales to fund Bitcoin purchases, and other companies are following suit.
The Rex ETF proposal, for example, plans to allocate a majority of its assets to convertible bonds issued by firms holding Bitcoin. Meanwhile, Strive has proposed a fund that invests in derivatives like swaps and options to gain exposure to convertible securities from MicroStrategy or similar companies.
Todd Sohn, an ETF strategist at Strategas, described the trend as a natural evolution. “It is rare that a new asset class comes around for the investing masses, and that’s what crypto is now – and Wall Street is always great at creating supply when there is demand,” he said.
“This is the evolution of the crypto ETF spectrum: futures-based, spot, thematic, and now convertibles, both hyper-specific for MicroStrategy and whoever else gets involved in a similar capacity,” Sohn added.
As ETF providers race to capture market demand, 2025 is set to be a landmark year for crypto investment innovation. However, with increased opportunities come heightened risks, underscoring the need for investors to tread carefully in this rapidly evolving landscape.
