The U.S. Securities and Exchange Commission (SEC) is moving toward simplifying the approval process for cryptocurrency exchange-traded products (ETPs), a change that could lead to an influx of new offerings in the market. However, industry executives emphasize that the launch of these products does not automatically ensure their success or any significant inflows.
In a recent statement, Matt Hougan, Chief Investment Officer of Bitwise, noted the importance of upcoming generic listing standards, expected as early as October, in potentially increasing the number of available crypto ETPs. “The adoption of these standards is a logical step forward, and it aligns with historical trends observed in the ETF market,” Hougan explained in his report on Monday.
Despite the promising outlook, Hougan cautioned that the presence of crypto ETPs alone should not be mistaken for a resurgence of investor enthusiasm for digital assets. “The mere existence of a crypto ETP does not guarantee substantial inflows. There’s a critical need for genuine interest in the assets themselves,” he remarked. For instance, he suggested that ETPs based on cryptocurrencies such as Bitcoin Cash may struggle to gain traction unless there is renewed vitality in the asset.
Hougan’s insights reflect wider concerns within the cryptocurrency community regarding the potential for new products to generate significant investor interest. Katalin Tischhauser, Head of Research at Sygnum, reinforced this sentiment earlier this year, noting the prevailing excitement around upcoming ETFs without clear indicators of strong market demand. “There seems to be a lot of hype, but where the substantial demand will emerge remains unclear,” she stated in an interview with Cointelegraph.
In anticipation of this potential influx, two altcoin ETFs tracking XRP and Dogecoin are set to launch in the United States this week, coinciding with increasing market activity. Recent data from CoinMarketCap showed that the Altcoin Season Index reached its highest level in 90 days this past Sunday, signaling renewed interest in alternative digital assets.
A notable milestone occurred on July 3, when the U.S.’s first Solana staking ETF recorded an impressive $12 million in inflows on its first trading day, a figure deemed a “healthy start” by Bloomberg ETF analyst James Seyffart. However, the SEC’s current approach involves reviewing spot crypto ETF applications on an individual basis, with requirements that ensure the underlying market exhibits sufficient liquidity and protection against manipulation.
With the current review process taking up to 240 days without the assurance of approval, the SEC is developing a new pathway that may lead to expedited decisions. According to Hougan, applications that meet clearly defined criteria could receive approval in as little as 75 days. “Under this revamped procedure, compliant crypto ETFs would be almost assured of being granted,” he noted.
As the landscape remains dynamic, analysts at Bitfinex have expressed views that a widespread altcoin rally might be contingent on the successful launch of crypto ETFs designed to allow investors exposure to riskier assets. This consideration highlights the complex interplay of regulatory advancements and market dynamics impacting the broader cryptocurrency ecosystem.
As developments unfold, stakeholders will be closely monitoring the SEC’s actions and the market response to newly launched ETPs, keeping an eye on whether these products can translate into lasting investment interest and success.
