Altcoin ETFs May Face Limited Initial Demand In The US

According to Cointelegraph, exchange-traded funds (ETFs) focusing on alternative cryptocurrencies might not attract significant investor interest in the United States, even if they launch this year. Investment analysts suggest that while asset managers have submitted numerous applications to introduce ETFs holding altcoins like Solana (SOL), XRP (XRP), and Litecoin (LTC), the initial demand is expected to be modest compared to core cryptocurrencies such as Bitcoin (BTC) and Ether (ETH). Katalin Tischhauser, head of research at Sygnum, noted that the excitement surrounding these ETFs does not necessarily translate into substantial demand. Tischhauser predicts that altcoin ETFs could see cumulative inflows ranging from several hundred million to $1 billion, which is significantly lower than the over $100 billion in net assets held by U.S. Bitcoin ETFs. Bryan Armour, director of passive strategies research at Morningstar, echoed this sentiment, stating that the magnitude of investors awaiting the ETF structure for altcoins is unlikely to match that of Bitcoin. Investors familiar with cryptocurrencies like Solana often already hold these assets through spot exchanges, according to Tischhauser. Wealth managers and institutional investors might consider altcoins if they are part of an index fund that tracks the broader crypto market. Recent ETF launches, such as Franklin Templeton's fund holding spot Bitcoin and Ether, indicate a growing interest in cryptocurrency index ETFs, though they currently exclude altcoins. Despite the cautious outlook, some asset managers remain optimistic about the potential of altcoin ETFs. Research by JPMorgan suggests that cumulative demand for these ETFs could exceed $14 billion. Federico Brokate, head of 21Shares’ U.S. operations, highlighted the benefits of holding altcoins in an ETF, such as institutional pricing and custody. He also noted that independent registered investment advisors (RIAs) are showing interest in altcoin ETFs to differentiate their offerings. Matt Horne, head of digital asset strategists at Fidelity Investments, mentioned that new investment products like crypto ETFs have an 'adoption spectrum' among different client segments. While some investors were early adopters of Bitcoin ETFs, others may gradually increase their adoption of altcoin ETFs over time. As the market evolves, the interest in these financial products is expected to grow, albeit at a slower pace initially.