Bitcoin ETFs Break Records in 2024, But Can They Repeat Success in 2025?
Introduction
The approval and launch of spot Bitcoin exchange-traded funds (ETFs) in the US were among the most anticipated financial products of recent years. As 2024 closed, the $129 billion in total net assets held by the ETFs suggests that 2025 will be even more groundbreaking.
What are Exchange-Traded Funds (ETFs)?
ETFs are financial products that reflect the value of their underlying assets. Regulated, transparent, and highly liquid, they provide investors with access to assets they might otherwise be unable or unwilling to hold directly. This format is especially appealing for cryptocurrencies, as it offers a regulated, widely accessible, tax-efficient investment option.
A Brief History of Spot Bitcoin ETF Rejections
Since 2013, the US Securities and Exchange Commission has consistently rejected all spot Bitcoin ETF applications. Firms such as VanEck, WisdomTree, Bitwise, ARK Invest, 21Shares, and Grayscale faced repeated refusals.
In 2021, the SEC approved futures-based Bitcoin ETFs, with ProShares’ BITO being the first to launch. Initially a success, it reached $1 billion in assets within just two days. However, investors’ interest in BITO declined quickly, with its assets under management (AUM) dropping from a peak of $1.4 billion to $500 million within a year.
This plunge corresponded with the broader crypto market crash but also reflected the limitations of such a product. Futures-based ETFs, while allowing their holders to profit from Bitcoin price movements, lack the efficiency of spot ETFs, which hold actual BTC. Furthermore, spot ETFs create immediate buying or selling pressure, directly influencing Bitcoin’s price and liquidity.
The Success of Spot Bitcoin ETFs
In the world of ETFs, the spot Bitcoin ETFs quickly became a phenomenon. From the outset, the nine new ETFs (excluding Grayscale and Hashdex) shattered many industry records, generating $2.2 billion in trading volume on the first day, with the iShares Bitcoin Trust ETF (IBIT) alone accounting for $1 billion.
According to Bloomberg Intelligence, IBIT and the Fidelity Bitcoin ETF were among the top-performing funds of 2024, with an average return of over 100%. This is a remarkable achievement considering that these funds are still in their infancy.
The ‘Digital Gold’ Narrative
The success of spot Bitcoin ETFs can be attributed to the growing recognition of Bitcoin as a store of value and a safe-haven asset. The "digital gold" narrative, which positions Bitcoin as a digital alternative to physical gold, has resonated with investors seeking to diversify their portfolios.
However, this narrative remains more attractive for Bitcoin than for other cryptocurrencies, such as Ethereum (ETH). Ether ETFs have been launched in 2024, but their performance has been more subdued compared to Bitcoin’s. Starting with $8.8 billion from the Grayscale Ethereum Trust, their total AUM grew modestly to $11 billion by year-end.
Will More Crypto ETFs Launch in 2025?
The start of 2025 shows that interest in spot Bitcoin ETFs remains strong, even amid a market correction. According to Farside, the ETFs have already attracted $1.1 billion in net inflows year-to-date.
As Bitcoin continues to gain recognition in political and financial circles, this momentum could persist and maybe even expand to other cryptocurrencies. For instance, the possibility of a spot Solana (SOL) ETF has become a hot topic in the crypto community, with Polymarket users assigning a 74% probability of an SOL ETF being approved in 2025.
Additionally, some Bitcoin detractors could reconsider their stance in 2025. Vanguard, one of the world’s largest investment management firms, has so far resisted entering the crypto game. However, the narrative could shift following the departure of its outspoken anti-Bitcoin CEO Tim Buckley and the arrival of former BlackRock executive Salim Ramji last summer.
Should Vanguard, a $9 trillion giant with a vast trading platform, launch a crypto ETF, it could significantly boost the market.
Conclusion
The rise of spot Bitcoin exchange-traded funds (ETFs) has been nothing short of remarkable. With over $129 billion in total net assets, these funds have shattered industry records and attracted significant attention from investors.
As the crypto space continues to evolve, it is likely that more ETFs will launch in 2025, further expanding the reach of cryptocurrencies to institutional investors. The future looks bright for spot Bitcoin ETFs, and it will be exciting to see how they continue to shape the financial landscape.
