Crypto exchange‑traded funds are not retreating with the market cycle — they are being built for the next one.
Even as digital assets struggle through another bearish phase, major issuers such as Bitwise, ProShares, and 21Shares are quietly expanding their product lines. The message is clear: short‑term price pain is not enough to derail the long‑term strategy around crypto ETFs.
New products in a “down” market
Over the past month, Bitwise Asset Management has filed for an ETF linked to Uniswap, the leading decentralized exchange protocol. This marks a shift from pure Bitcoin and Ether exposure toward funds that track the broader crypto infrastructure — in this case, DeFi.
ProShares, a pioneer in Bitcoin futures ETFs, is moving in a different direction but with the same conviction. The firm has sought approval for leveraged Bitcoin and Ether ETFs, aimed at traders looking to magnify exposure to daily price moves rather than simply “buy and hold.” These products target a niche but active audience: sophisticated investors and institutions that want to express tactical views without touching spot crypto directly.
Meanwhile, 21Shares has resubmitted applications for ETFs based on Ondo and Sei, two newer names in the digital asset space. That resubmission is important — it shows the firm is not abandoning the category despite the regulatory delays and market malaise. Instead, it is iterating, refining, and pressing ahead.
A crowded but committed ETF landscape
These launches are not happening in a vacuum. The US market already hosts more than 140 crypto‑focused ETFs, with 10 new funds rolled out this year alone. A BNB staking ETF is expected to debut soon, further broadening the menu beyond simple price‑tracking vehicles.
In other words, the shelf is already full — but issuers keep squeezing in new products. This suggests they are not simply chasing short‑lived hype. They are building a comprehensive toolkit of funds to be ready when the next wave of demand arrives, whether that comes from retail investors, family offices, or large institutions.
Todd Sohn, chief ETF strategist at Strategas, underscored this long‑term mindset in comments to Bloomberg. According to him, firms like 21Shares and Bitwise still believe deeply in the structural growth story of crypto. However, he also warned that persistent underperformance in the underlying assets can’t be ignored: weak returns now may dampen future inflows, at least temporarily.
Market pain is real — and on display in the numbers
The optimism of issuers stands in sharp contrast to the current market data. After a fresh sell‑off in October, Bitcoin dropped sharply, dragging altcoins and smaller tokens with it. Liquidity has thinned, volatility has risen, and the broader appetite for risk has faded.
Data provider Glassnode estimates that buyers of US spot Bitcoin ETFs, on average, are sitting on paper losses. The implied average purchase price sits near 84,100 dollars per BTC, while the market currently trades around 66,000 dollars. That mismatch explains why selling pressure has picked up and why investor sentiment feels so fragile.
The result has been heavy outflows. In recent months, more than 1.5 billion dollars has been withdrawn from Ether‑focused ETFs, while Bitcoin ETFs have seen over 3.5 billion dollars pulled out. These redemptions do not necessarily mean investors are abandoning crypto forever, but they do show that many are reconsidering timing, risk levels, and allocation sizes.
Why issuers keep building despite the pain
The contradiction is striking: money is leaving existing ETFs while new ones are still being designed and filed. Several factors explain why issuers are undeterred:
1. Cycles are normal in crypto
Crypto has always moved in boom‑bust cycles tied loosely to macro liquidity, interest rates, and innovation waves. ETF issuers understand that by the time a new product is launched and gains regulatory approval, the market cycle may already have shifted again. They are building for the next upswing, not the current downswing.
2. Institutional adoption is a multi‑year story
Large asset managers, pension funds, and corporate treasuries move slowly. Many of them are still finalizing mandates, risk frameworks, and internal policies for digital assets. Once they are ready to allocate, they will likely prefer regulated, exchange‑traded vehicles over direct token custody. Issuers want to be the first call when those mandates unlock.
3. ETFs reduce the frictions that kept many on the sidelines
For many investors, direct ownership of crypto comes with operational and psychological hurdles: wallets, private keys, security risk, and uncertain tax treatment. ETFs wrap that exposure in a familiar, brokerage‑friendly format. As more investors look for “crypto without the hassle,” the structural case for these funds remains compelling, independent of short‑term price moves.
4. Differentiation is the new battleground
With dozens of vanilla Bitcoin and Ether products already trading, the next phase is about specialization. Leveraged, yield‑generating, staking, sector‑themed, and DeFi‑linked ETFs allow issuers to carve out niches. Even in a bear phase, being first to market in a new sub‑category can pay off later when volumes return.
The risks ETF investors are learning the hard way
The recent sell‑off has also exposed how quickly ETF buyers can find themselves underwater, especially when they treat crypto funds like low‑risk exposure.
Several lessons are emerging:
– ETFs don’t remove underlying asset risk
A Bitcoin ETF still tracks Bitcoin. If the coin falls 20%, the ETF will mirror that drop (minus fees and tracking differences). The regulated structure does not shield investors from volatility; it merely changes the way they access it.
– Average entry price matters
The Glassnode analysis of ETF buyers’ average purchase price near 84,100 dollars versus a current price of about 66,000 dollars is a stark reminder: buying at euphoric peaks sets investors up for extended drawdowns. ETFs make access easy, which also makes it easy to buy at the wrong time.
– Outflows can amplify short‑term moves
When large sums exit ETFs, issuers must adjust their underlying positions. In the case of physically backed funds, this can translate into selling pressure on the asset itself, especially in thinner liquidity environments. That feedback loop can deepen short‑term declines.
Beyond Bitcoin: the rise of “infrastructure” and thematic crypto ETFs
The Uniswap‑linked filing from Bitwise and the Ondo and Sei plans from 21Shares point to the next frontier: ETFs that don’t just track flagship coins but entire segments of the crypto ecosystem.
This shift has several implications:
– Exposure to DeFi and protocol revenues
A Uniswap‑related ETF effectively offers exposure to the economics of a decentralized trading platform — trading volumes, fee structures, and protocol adoption — rather than just to the price of a single coin.
– Emerging‑project risk inside a regulated wrapper
Ondo and Sei are still relatively early‑stage compared with Bitcoin or Ether. Packaging them into ETFs creates a bridge for more conservative investors to access high‑beta crypto themes without leaving the regulated securities environment.
– Portfolio diversification within crypto
Thematic and infrastructure ETFs can help investors diversify away from pure Bitcoin dominance and build more nuanced crypto allocations: for example, mixing store‑of‑value plays with DeFi, smart‑contract platforms, and staking income strategies.
How tighter liquidity and macro conditions affect crypto ETFs
The macro backdrop cannot be ignored. Higher interest rates have made cash and bonds more attractive, pulling attention away from speculative assets. At the same time, tighter liquidity has made it harder for large investors to move in and out of positions without affecting prices.
For crypto ETFs, that means:
– Lower trading volumes and wider spreads
Many niche crypto funds now trade with thinner volumes, which can increase bid‑ask spreads and overall trading costs for investors, especially in leveraged or thematic products.
– More sensitivity to macro headlines
In a fragile environment, inflation data, central bank comments, or geopolitical shocks can trigger sharper reactions in crypto ETFs than during periods of abundant liquidity.
– A premium on product quality
When every basis point of cost and tracking error matters, investors become more selective. ETF issuers that offer transparency, tight tracking, and robust liquidity will stand out, while weaker, copy‑cat products may fade.
What investors should consider before diving into new crypto ETFs
For those contemplating these products — especially the newer, leveraged, or thematic ones — a few questions are critical:
1. What exactly does the ETF hold or track?
Is it physically backed? Futures‑based? Linked to a single protocol, or a diversified basket? The more complex the structure, the more important it is to understand the mechanics.
2. What is the time horizon and risk tolerance?
Leveraged Bitcoin and Ether funds are generally designed for short‑term trading, not long‑term compounding. Thematic funds linked to newer projects may experience far greater volatility than large‑cap coins.
3. How does this fit within a broader portfolio?
Even within an ETF wrapper, crypto remains a high‑risk allocation. Position sizing, diversification, and rebalancing plans matter more than ever.
4. Are investors prepared for multi‑year drawdowns?
The current wave of losses in spot Bitcoin and Ether ETFs illustrates how a single unlucky entry point can hurt returns for years. Crypto exposure should be sized with that possibility in mind.
The long‑term trajectory: regulation, standardization, and mainstreaming
Despite the current challenges, the direction of travel for crypto ETFs seems clear. Regulators are gradually establishing clearer frameworks. Custody, pricing, and disclosure standards are improving. Traditional financial institutions are increasingly willing to partner with or white‑label crypto ETF products.
Over time, this will likely lead to:
– More standardized, lower‑fee core products
Bitcoin and Ether exposure may eventually resemble commodity ETFs in cost and design, serving as building blocks for diversified portfolios.
– A richer ecosystem of specialized strategies
From staking‑enabled funds to cross‑asset products that blend crypto with equities or bonds, the range of strategies available through ETFs will expand.
– Greater integration into traditional asset allocation models
As data builds across multiple cycles, allocators will be able to treat crypto ETFs as a discrete asset class with measurable correlations and risk patterns, rather than as an exotic novelty.
Crypto ETFs: bruised, not broken
The current downturn has inflicted real damage on recent buyers of crypto funds. Billions have flowed out, and sentiment is fragile. Yet the relentless pipeline of new filings from Bitwise, ProShares, 21Shares, and others shows that the industry does not view this as the end of the story — only another chapter in a notoriously cyclical market.
For investors, the takeaway is two‑fold. Crypto ETFs are likely to remain a permanent feature of the financial landscape, offering increasingly diverse ways to access digital assets. But permanence does not equal safety. The wrapper may be familiar, yet the underlying remains volatile, experimental, and subject to abrupt repricing.
Downturn or not, the bet from issuers is that when the next wave of capital arrives, it will prefer an ETF ticker over a private key.