Crypto ETFs: A new era for digital asset investing

The surge in investor demand for regulated access to digital assets has propelled cryptocurrency exchange-traded funds (ETFs) into the financial mainstream. In the final week of April, Bitcoin ETFs posted US$1.8 billion in net inflows, their third consecutive week of gains, with BlackRock’s IBIT ($IBIT) leading the pack at US$2.48 billion.¹ ETFs are acting as a bridge between traditional markets and digital assets.

How crypto ETFs work

Crypto ETFs are listed funds that hold or track digital assets like Bitcoin or Ethereum. They trade on traditional stock exchanges. Investors can buy and sell shares through their brokerage accounts, just like any other stock or ETF.

There are two main types:

Spot ETFs hold the actual cryptocurrency, providing investors with direct exposure to its price movements.

Futures ETFs track derivative contracts, based on crypto assets, without holding the asset itself.

Spot crypto ETFs are gaining significant traction. Their popularity stems from the simplicity of stock exchange access without the need for direct crypto custody or technical know-how, this is a big draw for traditional financial investors as the technical knowledge gap in crypto is a big one.

Investors exploring entry points might start by comparing fee structures and AUM of leading spot products like IBIT and FBTC. Understanding the issuer, underlying holdings, and rebalancing mechanics can help in choosing a product aligned with individual goals.

Institutional investors are pouring in, with global crypto ETF assets reaching US$134.5 billion by late 2024, a staggering 950% increase in a year.² BlackRock’s IBIT became the fastest ETF to surpass US$10 billion in assets, doing so in just 51 days.

Institutional adoption

For many investors, ETFs allows participation in crypto without the need to manage wallets or custody arrangements. Portfolio managers can incorporate these products into diversified strategies while staying within regulatory frameworks.

Ethereum ETFs have also picked up momentum, with BlackRock’s ETHA and Fidelity’s FETH posting notable gains² As discussions around Ethereum staking ETFs progress, this part of the market is beginning to draw more interest.

Retail and institutional investors alike should monitor developments in staking ETFs. These products may offer yield-like characteristics, but they come with added technical and regulatory complexities. Those interested can review public filings and commentary from issuers like BlackRock and Fidelity.

There are some downsides to these products. ETF fees can range from 0.15% to 1% annually, which may affect long-term returns. Volatility is also a major factor: while Bitcoin has rebounded more than 600% since its 2022 lows, previous cycles have seen sharp drawdowns, this volatility can be tough to stomach for those unfamiliar with the swings of the crypto market. Regulatory shifts could also reshape the market overnight.

Unlike buying Bitcoin directly on an exchange, crypto ETFs do not grant ownership of the underlying asset. When you purchase crypto directly, you control the asset and can transfer it to personal wallets, an option not available with ETFs.

Those comfortable managing digital wallets might consider a hybrid approach—holding ETFs for regulated exposure and small amounts of crypto directly for autonomy and custody flexibility.

What to watch

Bitcoin ETF issuers like Hashdex and Bitwise are accelerating product development.³ At the same time, they are cutting fees to compete for investor inflows. Ethereum staking and hybrid ETFs, including those that combine crypto with traditional assets like gold, are also in development.

The U.S. Securities and Exchange Commission (SEC) is expected to deliver final rulings on altcoin ETFs, including Solana, XRP, and Dogecoin, between July and December 2025.⁴ These decisions could set the tone for how future ETF approvals are approached. Bloomberg analysts estimate a 75% or higher chance that spot ETFs tied to SOL, XRP, DOGE, ADA, and AVAX will get the green light before year-end, with basket-style ETFs seen as even more likely.⁴

Investors interested in diversifying beyond Bitcoin and Ethereum should track SEC decisions and be prepared to evaluate first-mover altcoin ETF products. Following issuer commentary, prospectuses, and regulatory updates can help gauge potential risk/reward profiles.

Regulatory activity is also picking up globally: Brazil recently approved a spot XRP ETF⁵, South Korea’s presidential frontrunner has pledged ETF-friendly reforms⁶, and Thailand is reviewing local rules for spot Bitcoin products.⁷.

Fee structures, product design, and regulatory clarity will define which ETFs capture serious investor attention in the months ahead.

The bottom line

Crypto ETFs are fast becoming the preferred gateway for investors, particularly institutions, seeking digital asset exposure. With new products on the horizon and potential supply implications from spot ETF structures, investor conviction appears to be deepening.

For investors, now is a key time to define their thesis on crypto exposure—whether for diversification, growth, or macro hedging—and explore ETF options that align with that view. Portfolio allocation tools, issuer insights, and ETF research platforms like Morningstar or ETF.com can provide helpful starting points.

But this growth brings fresh questions around regulation, risk, and long-term market dynamics in an asset class still defined by volatility.

Sources

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