Two critical decisions recently made by the U.S. Securities and Exchange Commission (SEC) have paved the way for a major expansion in exchange-traded funds (ETFs). These developments are paving the way for rapid diversification, particularly among cryptocurrency ETFs.
The SEC has approved general listing standards for spot crypto ETFs. This step eliminates lengthy individual approval processes, allowing ETFs for various cryptocurrencies to be launched much faster. Beyond Bitcoin and Ethereum, digital assets like Solana and XRP, as well as cryptocurrencies with smaller populations, could also be offered to investors in the ETF format.
“We could see a dozen new crypto products launch in the next 60 to 90 days, tracking Solana, XRP, and other coins lagging behind Bitcoin and Ethereum,” ETF expert David Nadig said on CNBC's “ETF Edge.” The Solana ETF currently has a holding of approximately $230 million, while the XRP ETF has a holding of approximately $200 million.
Crypto investment strategies are also becoming increasingly diverse. In addition to single-currency spot trading, new products like Bitcoin income ETFs and index ETFs are emerging. The SEC also recently approved Grayscale Investments' conversion of a mutual fund into an ETF.
The SEC's decisions weren't limited to crypto ETFs. Yesterday, traditional mutual fund companies were also granted the right to offer ETF share classes. Dimensional Fund Advisors was the first asset management firm to receive this approval. Currently, over 70 fund providers have submitted applications, and experts predict this number will grow rapidly.
According to YCharts data, more than 4,100 ETFs are currently traded in US markets. Experts predict that up to 3,000 new products could be added to that number thanks to the new regulations.
“These two major regulatory changes are opening the door to a product explosion for investors,” Nadig said. However, experts note that while increased options provide flexibility for investors, they also bring with them risks that should be considered.
*This is not investment advice.