Galaxy: The altcoin ETF army is coming soon. Which ones have a bright future?

Source: Galaxy; Compiled by: Jinse Finance

On October 28th, three new cryptocurrency spot exchange-traded funds (ETFs) began trading in the US market, but none of them are related to Bitcoin or Ethereum.

Canary launched two ETFs, one tracking the HBAR token (HBR) on the Hedera blockchain, and the other tracking one of the oldest cryptocurrency networks—Litecoin (LTCC). However, Bitwise's Solana Spot Staking ETF (BSOL) has become the focus.

Earlier this month, Grayscale added staking functionality to its two Ethereum spot exchange-traded products (ETPs); on October 29th, the Grayscale Solana Trust (GSOL) also launched staking functionality. With the launch of these products, there are now 115 cryptocurrency ETFs in the US, of which more than 25 offer spot trading of a single-asset cryptocurrency.

In anticipation of the government shutdown, the US SEC issued guidance in advance, allowing issuers to remove "delayed amendments" from their registration statements.

This change made the documents automatically effective after a 20-day waiting period, allowing these ETFs to begin trading during the government shutdown. Bitwise's BSOL attracted $69.5 million in net inflows on its first trading day, while Canary's two altcoin ETFs saw no inflows. The next day, BSOL attracted another $46.5 million in inflows, compared to only $2.2 million for HBR and $0.5 million for LTCC. By Thursday's close, BSOL had accumulated $37 million in net inflows, HBR unexpectedly saw $30 million, while LTCC remained unchanged. In the first three days, BSOL accumulated approximately $150 million in inflows, becoming the best-performing new ETF in 2025. Galaxy's View: The latest wave of cryptocurrency ETF launches reveals larger issues facing the digital asset industry in terms of timing, regulation, and competition. These ETFs are the first spot cryptocurrency ETPs to list since the U.S. SEC approved the Common Listing Standard in September, and this comes during a government shutdown. The launch of these ETFs directly reflects the advantages of the new listing framework, which allows national exchanges to list eligible spot cryptocurrencies and commodity ETPs according to standardized criteria, thus simplifying the listing process for eligible assets. Issuers also utilized SEC procedural guidance that allows registration statements to automatically become effective after a 20-day waiting period, provided that amendments delaying effectiveness are removed. Bloomberg analyst James Seyffart points out that it is unclear whether this procedural shortcut officially applies to cryptocurrency ETF filings, but it is noteworthy that issuers are moving quickly to gain a competitive edge. In an increasingly fee-constrained market, timing is crucial, and some issuers are using this automatic effectiveness mechanism to bring products to market through unconventional means, highlighting the intense competition in the sector. The highly anticipated launch of the first staking-enabled Solana spot ETF is a milestone for the US market. Bitwise's BSOL attracted $116 million in inflows in its first two days, representing approximately 0.1% of Solana's $106 billion market capitalization. In contrast, the nine Ethereum spot ETFs launched on July 23, 2024, saw $26.4 million in outflows in their first two days, primarily due to redemptions from Grayscale. Inflows remained subdued for the next few months, only showing significant growth around the November election. Conversely, the ten Bitcoin spot ETFs attracted $858 million in inflows in their first two days, roughly 0.1% of Bitcoin's $837 billion market capitalization at the time. BSOL's debut was particularly noteworthy because its early inflows were exceptionally strong, given the far fewer options available. Currently, there are only two Solana spot ETFs, while Ethereum and Bitcoin have nine and ten respectively. As Eric Balchunas of Bloomberg noted, BSOL also set a record for the highest first-day trading volume of any ETF this year, at approximately $56 million. In contrast, trading activity was minimal for the two altcoin ETFs—HBR and LTCC—with zero inflows on the first day and $2.2 million and $0.5 million respectively on the second day. This highlights that demand tends to weaken as risk levels increase. Traditional investors are still relatively unfamiliar with altcoins, and it will take time to popularize these protocols. The long-term prospects for altcoins are bleaker compared to Bitcoin, Ethereum, or Solana, which explains their lack of market interest, as these networks play a narrower role in the broader crypto ecosystem. The price fluctuations of all three cryptocurrencies after their ETF listings were relatively limited. LTC rose 3% on the second day of trading, HBAR rose 2.6%, and Solana's SOL rose only 1.6%, suggesting that most of the upward movement likely occurred before the ETF launch. In the coming months, more ETFs are expected to list in compliance with the new general listing standards. Besides Solana, Hedera, and Litecoin, potential candidates include Dogecoin (DOGE), Bitcoin Cash (BCH), LINK, XLM, AVAX, SHIB, and DOT. Finally, there's a noteworthy detail regarding BSOL. The fund aims to pledge up to 100% of its assets, and is currently pledged at approximately 90%. Most issuers limit pledging to 50%-80% to ensure liquidity, as unpledged SOL takes about two days. To mitigate redemption risk, Bitwise partners with third parties to exchange unpledged SOL for already pledged SOL. This arrangement maintains the fund's liquidity while generating returns. In a market where every basis point is crucial, this innovation could prompt other issuers to follow suit.