Author: Dami-Defi Compiler: AididiaoJP, Foresight News
Bloomberg predicts that following Bitcoin and Ethereum ETFs, over 200 crypto ETFs will launch in the future. Will altcoins receive the same favor, or face more volatility? Let's take a deeper look:
Historical Background
DATs: Collateral Risk and MNAV Observation
Bullish and Bearish Cases for Altcoin ETFs
How did we get here? Key Catalysts
Macro Impact: $300 Billion in Stablecoin Liquidity Will Drive the DeFi Bull Run
Contrarian Signals
What to Watch During ETF Launches
Three Highly Influential ETFs to Watch
The crypto ETF landscape has evolved dramatically since the first ETFs launched. Total net assets in US spot Bitcoin ETFs have exceeded $146 billion, solidifying Bitcoin's dominance of the crypto market with a 59% share. Ethereum ETFs rank second, holding approximately $25 billion in assets. Cumulative net inflows into spot Bitcoin ETFs have now exceeded $50 billion, and the market continues to see daily inflows. Before the advent of crypto ETFs, traditional finance held exposure to digital assets through instruments like GBTC and MSTR. This approach gave rise to Digital Asset Treasury companies (DATs), which accumulate specific altcoins like ETH, SOL, and XRP so that investors can gain exposure through stocks. DATs serve as a bridge between the pre-ETF era and today's pending altcoin ETFs, and they are also where risks arise. DATs: Collateral Risk and MNAV Observation The market capitalization to net asset value (MNAV) multiple is important because it indicates how easily a DAT can raise capital. When it's above 1, debt is readily available, allowing for the purchase of more tokens. If it remains below 1, funding dries up, and reserve sales become a real risk. Pay close attention to the MNAV and premiums, PIPE unlock dates, liquidity, and any balance sheet information included in 10-Q filings or operational updates for top DATs. Pressure could also spread; troubles in smaller DATs could affect larger ones, or issues at the top could ripple downward. Bullish and Bearish Cases for Altcoin ETFs The bullish case: The rise of altcoin ETFs could soon provide a significant liquidity boost to the market. Take the ProShares CoinDesk 20 ETF, for example; it includes key assets such as HBAR, ICP, XRP, and SOL. In total, there are 155 ETPs tracking 35 cryptocurrencies awaiting approval. A surge of liquidity into these ETFs would drive up the prices of the underlying altcoins, extending the gains seen in Bitcoin and Ethereum ETFs. Furthermore, ETF inflows drive market attention to the underlying tokens, prompting some allocators to purchase higher-beta DATs. DATs subsequently raise funds and accumulate more tokens, potentially further strengthening the altcoin narrative. More importantly, issuers like BlackRock, Fidelity, VanEck, and Grayscale provide a trusted gateway. This could unlock larger, more stable investments than could be accessed solely through exchanges.
Bearish Reason
Altcoins, on the other hand, are struggling to recapture their usual bull market hype, and this weak demand could limit their performance. The CoinDesk 20 Index highlights this issue: BTC and ETH dominate with weightings of 29% and 22%, respectively, while altcoins like ICP and FIL comprise just 0.2% of the basket. This concentration means more capital will flow into mainstream cryptocurrencies, benefiting them more.
Furthermore, if funds shift from DAT shares to altcoin ETFs, the DAT's net asset value (MNAV) could fall below 1, leading to a depletion of funds. This could force the sale of reserves, creating direct selling pressure on those altcoins.
Microstructure at launch: Even with a bullish medium-term outlook, expect 24-72 hours of "all good comes bad" volatility around the ETF's launch.
The growing interest in altcoin ETFs is driven by a combination of factors:
On September 17, the U.S. Securities and Exchange Commission (SEC) introduced the "Universal Listing Standard for Commodity Trust Shares." This standard shortens the approval time for new ETFs and makes the process more predictable. Thanks to the SEC's universal listing standard, we may see multiple ETFs approved in a short period of time when the government reopens.
Earlier, in July, the SEC allowed in-kind redemptions for non-Bitcoin crypto ETFs, bringing them into line with traditional commodity ETFs. This reduced liquidity friction and attracted more institutional capital.
The success of Bitcoin and Ethereum spot ETFs has also driven broader adoption, with 59% of institutions allocating more than 10% of their portfolios to digital assets by mid-2025. Rule of thumb (strict criteria): An ISG-regulated spot trading venue, or at least six months of regulated futures trading with data sharing, or a tracking ratio of 40% or more in an existing listed ETF. This clears the way for many major and mid-cap tokens. Macro Impact: $300 Billion in Stablecoin Liquidity Will Drive the DeFi Bull Run As of October 2025, there will be nearly $300 billion in stablecoin liquidity in circulation globally. This massive infrastructure lays the foundation for an ETF-driven capital catalyst, bringing institutional money into the DeFi ecosystem and amplifying returns. The synergy between $300 billion in stablecoin liquidity and the expected inflows into altcoin ETFs could create a multiplier effect. For example, the observed inflow-to-market capitalization multiplier for Bitcoin ETFs suggests that every $1 of ETF capital could inflate market capitalization by several dollars. If altcoin ETFs gain traction, this could unlock tens of billions of dollars, pushing total crypto market capitalization to new highs by the end of 2025. With increased regulatory clarity under Trump-era policies, the influx of institutional capital could significantly boost DeFi protocols, particularly those integrating assets like LINK and HBAR, which bridge traditional finance and blockchain, or collateralized ETFs like REX-Osprey's proposed for altcoins like TAO and INJ.
Furthermore, with a weakening dollar and risk assets near all-time highs, ETFs provide a convenient path for institutions to rotate along the risk curve from BTC to large-cap altcoins and then to mid-cap stocks and DeFi.
Multiplier Warning: The impact of inflows on valuations relies on continued net creation and a healthy funding basis. DAT pressure (MNAV < 1 or unlocking events) may temporarily suppress this multiplier. Contrarian Signals: Jim Cramer, ever the contrarian, recently urged investors to sell cryptocurrencies and switch to stocks. Given his track record of being wrong at key turning points, I believe it's time to become more resolute in holding crypto assets. Concerns about ETFs cannibalizing DATs and triggering liquidations coexist with unprecedentedly strong market access and clarity, ETF pathways, and approval queues. This mismatch could create a bullish pattern if first-week inflows remain strong. Historically, the combination of heightened concerns about DAT pressure and improved market access has often signaled accumulation phases rather than market tops. What to Watch During ETF Launches: Days 0-3: Expect front-running and the risk of "all good comes bad." Pay attention to net creations and redemptions, as well as the bid-ask spread displayed on the screen.
Weeks 1-4: If net inflows remain strong and spot prices align with perpetual swap prices, a buy-on-the-dip bias may persist.
Rotation Signal: Higher weekly highs/lows relative to BTC for other cryptocurrencies suggest expanding altcoin demand. Failing this signal, favor maintaining a heavy BTC position.
Cross-asset Clue: DAT premiums improve with ETF inflows, creating a positive feedback loop. Three Highly Influential ETFs to Watch: Solana: Solana is the highest-conviction altcoin, aside from BTC and ETH ETFs, that stands to benefit most from diversification. Of the 155 crypto ETFs awaiting approval, 23 target Solana. This strong sign of institutional demand shows where funds may be flowing. Therefore, an ETF tracking Solana is one of the most important ETFs to watch and potentially deliver outsized returns. ProShares CoinDesk 20 ETF: Tracking 20 top cryptocurrencies, including BTC, ETH, and altcoins like XRP, can help diversify institutional exposure. REX-Osprey 21-Asset ETF: Designed to provide exposure to specific cryptocurrencies and offer staking functionality for tokens like ADA, AVAX, DOT, NEAR, SEI, SUI, TAO, and HYPE. The fourth quarter could quickly become dominated by the ETF narrative, boosting related sectors like DeFi. Whether or not altcoins can capture the same demand as BTC, the momentum is undeniable. Stay confident and position yourself for the upcoming altcoin ETF narrative.
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