As the market leader, bitcoin opened the doors for spot crypto ETFs in early 2024 when 11 (at first, then 12) such products were finally greenlighted in the United States following years and years of delays and rejections.
Ethereum followed suit in July and now the question is not if but which cryptocurrency will have its own spot exchange-traded fund in the US, with some of the leading contenders being XRP, SOL, DOGE, and LTC.
Trying to summarize the importance of crypto ETFs in just one minute, Ripple’s CEO, Brad Garlinghouse, outlined two key reasons why these financial vehicles are so important.
Institutional Access
Before the January 2024 launch of spot BTC ETFs on Wall Street, institutional market participants had to rely on more unusual (for them) access points to get bitcoin exposure, such as cryptocurrency exchanges and self-custody. However, the introduction of these financial vehicles changed the game entirely for them, which is evident from the mindblowing demand for most spot Bitcoin ETFs, especially BlackRock’s IBIT.
“So, this was really the first time you had institutions be able to go on Wall Street and trade directly in crypto,” Garlinghouse explained.
Capital that previously couldn’t enter the cryptocurrency space, such as endowment, pension funds, or even mutual funds, now has a dozen options to do so.
Institutionalizing the Industry
The second reason complements the first, Garlinghouse noted, as it simply changes the focus in the cryptocurrency industry, at least for the bigger projects, mostly on larger investors and institutions.
As mentioned above, BlackRock’s IBIT broke multiple records in terms of net inflows for its year and a half in existence.
“It should be no surprise that a Bitcoin ETF was the fastest ETF ever to get to $1 billion in assets.”
It has become a behemoth as its total holdings are double that of the rest of the Bitcoin ETFs combined. As of Friday’s close, BlackRock’s BTC ETF had almost $48 billion in AUM as it continues to dominate the net inflows. IBIT has not seen a single day in the red since the market-wide crashes in early April. Consequently, Garlinghouse predicted that it will eventually close in on the gold ETFs as well.
In terms of a spot Ripple ETF, the news from the SEC is somewhat expected as the agency continues to delay making a decision on a couple of filings. Polymarket shows that the chances of an XRP ETF hitting the US markets this year stand at well over 80%, but the percentage drops to 21% when the deadline is set at July 31.
Nevertheless, Ripple saw some success on the ETF front as a few futures-based funds went live for trading in the past month or so.
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