Galaxy: The army of altcoin ETFs is about to arrive. Which ones have a bright future?

Source: Galaxy; Compiled by Jinse Finance

On October 28, three new cryptocurrency exchange-traded funds (ETFs) began trading in the U.S. market, but they are not related to Bitcoin or Ethereum.

Canary has launched two ETFs, one tracking the HBAR token (HBR) on the Hedera blockchain, and the other tracking Litecoin (LTCC), one of the oldest cryptocurrency networks. However, the Solana spot staking ETF (BSOL) launched by Bitwise has become the focal point.

At the beginning of this month, Grayscale added a staking feature to its two Ethereum exchange-traded products (ETPs); on October 29, Grayscale's Solana Trust (GSOL) also launched a staking feature. With the introduction of these products, there are currently 115 cryptocurrency ETFs in the United States, of which more than 25 offer single-asset cryptocurrency spot trading.

Due to the anticipation of a government shutdown, the U.S. SEC issued guidance in advance, allowing issuers to remove “delayed amendments” from their registration statements. This change enables the documents to automatically take effect after a 20-day waiting period, allowing these ETFs to begin trading during the government shutdown.

BSOL, under Bitwise, attracted a net inflow of $69.5 million on its first trading day, while the two altcoin ETFs from Canary saw no inflows. The next day, BSOL attracted another $46.5 million in capital, in contrast, HBR and LTCC only had inflows of $2.2 million and $500,000 respectively. As of Thursday's close, BSOL accumulated a net inflow of $37 million, HBR unexpectedly saw a net inflow of $30 million, while LTCC remained unchanged. In the first three days, BSOL's total capital inflow was about $150 million, making it the best-performing ETF rookie of 2025.

Galaxy's perspective:

The latest wave of cryptocurrency ETFs reveals greater issues facing the digital asset industry in terms of timing, regulation, and competition. These ETFs are the first spot cryptocurrency ETPs to be listed since the U.S. SEC approved universal listing standards in September, and they are launched during a government shutdown. The introduction of these ETFs directly reflects the advantages of the new listing framework, which allows national exchanges to list eligible spot cryptocurrency and commodity ETPs according to standardized criteria, thereby streamlining the listing process for qualified assets. Issuers have also taken advantage of the SEC's procedural guidance, which allows registration statements to automatically take effect after a 20-day waiting period, provided that any delayed effective amendments are removed.

Bloomberg analyst James Seyffart pointed out that it is currently unclear whether this procedural shortcut officially applies to the filing of cryptocurrency ETFs, but it is noteworthy that issuers are acting quickly in an effort to seize the opportunity. In a market where fees are increasingly compressed, timing is crucial, and some issuers are utilizing this automatic effectiveness mechanism to bring products to market through unconventional means, highlighting the intensity of competition in the field.

The long-awaited launch of the first Solana spot ETF supporting staking is a milestone for the U.S. market. Bitwise's BSOL attracted $116 million in inflows within the first two days of its launch, accounting for about 0.1% of Solana's $106 billion market cap. In contrast, the nine Ethereum spot ETFs launched on July 23, 2024, experienced an outflow of $26.4 million in the first two days, primarily due to Grayscale's redemptions. Inflows remained relatively sluggish in the following months, with a significant increase only around the November elections. Comparatively, the ten Bitcoin spot ETFs attracted $858 million in inflows within the first two days, also accounting for about 0.1% of Bitcoin's $837 billion market cap at that time. The remarkable debut of BSOL is particularly noteworthy given that the number of available products is far lower than that of other offerings, resulting in exceptionally strong early inflows. Currently, there are only two Solana spot ETFs, while there are nine Ethereum and ten Bitcoin ETFs. As Bloomberg's Eric Balchunas pointed out, BSOL also set the record for the highest first-day trading volume among all ETFs this year, with a trading volume of about $56 million on its debut.

In contrast, the trading activity of the two altcoin ETFs—HBR and LTCC—has been minimal, with zero capital inflow on the first day and capital inflows of $2.2 million and $500,000 on the second day, respectively. This highlights that as the risk level increases, demand often tends to weaken gradually. Traditional investors are still not very familiar with altcoins, and it takes time to educate them about these protocols. Compared to Bitcoin, Ethereum, or Solana, the long-term prospects for altcoins are relatively bleak, which also explains the lack of market interest, as these networks play a narrower role in the broader crypto ecosystem.

The price fluctuations of these three cryptocurrencies after the ETF listing were relatively limited. LTC rose by 3% on the second day of ETF trading, HBAR increased by 2.6%, while Solana's SOL only went up by 1.6%, indicating that most of the upward momentum likely occurred before the ETF was issued.

In the coming months, more ETFs are expected to be listed in accordance with the new general listing standards. Potential candidate assets may include Dogecoin (DOGE), Bitcoin Cash (BCH), LINK, XLM, AVAX, SHIB, and DOT, in addition to Solana, Hedera, and Litecoin.

Finally, there is a noteworthy detail about BSOL. The fund aims to stake up to 100% of its assets, and currently approximately 90% is staked. Most issuers limit their staking ratio to 50%-80% to ensure liquidity, as unstaking SOL takes about two days. To reduce redemption risk, Bitwise collaborates with third parties to exchange the SOL to be staked for already staked SOL. This arrangement maintains the liquidity of the fund while generating returns. In a market where every basis point is crucial, this innovation may encourage other issuers to follow suit.