Crypto ETFs Are Diversifying. Can Demand Keep Up?

What the world needs now is … another crypto ETF?

That may be what asset managers are hoping. The list of would-be products seeking the Securities and Exchange Commission’s approval keeps growing. One of the latest proposed ETFs, from KraneShares, would invest across a considerable range of crypto assets. That fund, the KraneShares CF Large Cap Crypto Index ETF, for which the firm filed a registration statement for SEC review last Friday, would hold bitcoin, ether, XRP, Solana, Dogecoin, Cardano and Hedera, according to the initial prospectus. And another firm, Bitwise, filed last week for three products that would expand its crypto coverage: The Bitwise Bitcoin & Ethereum ETF; Bitwise Aptos ETF; and Bitwise Dogecoin ETF. In the short history of the crypto ETF market, sales and assets have been dominated by a few players, most notably BlackRock, whose iShares Bitcoin Trust ETF represents nearly $75 billion. That hasn’t stopped companies from developing new ETFs, but there is a question about demand.

“[For] your average investor, only 8% are concerned about adding crypto products to their portfolios,” said Stephen Caruso, associate director of wealth management at Cerulli Associates.

Big Plans

The SEC has yet to approve a range of spot-price crypto ETFs. Regardless, the product space has branched out since the first bitcoin ETFs were approved in 2024. There are iterations of income-focused bitcoin ETFs, for example, and firms are preparing funds that offer staking capabilities, in the case of Solana and other crypto assets. There is increasing interest among retail investors in crypto ETFs broadly, and that can translate to opportunities for conversation with financial advisors, Caruso said. For example, about 20% of retail investors who haven’t worked with advisors before, but are strongly considering doing so, are interested in crypto ETFs, he said.

Survey data show that demand for crypto ETFs varies by age and wealth:

• People under 40 show the most interest, as do those with less than $250,000 in investable assets — demand decreases considerably above that amount but ramps up again for those with $5 million or more, according to Cerulli.
• Among Gen Zers and millennials who are already ETF investors, roughly half have some exposure to crypto ETFs, figures from a recent Nasdaq report show.

Competing for That Coin: “Crypto is not one-size-fits-all, and most of these digital assets have drastically different use cases and profiles … Ultimately, you want to understand why you are holding any digital asset and how it fits into your overall portfolio,” said Kevin Feig, founder of Walk You to Wealth and previously head of risk at crypto exchanges Coinbase and Kraken. “More ETF options from multiple providers will likely lead to price competition and expense-ratio reductions, which is always a win for individual investors.”