If you’re investing in crypto, the ETF effect is something you’ll want to know about. It’s quickly becoming a key driver of the major coins that influence the whole market.
So, what exactly is an ETF?
An ETF (Exchange Traded Fund) is a type of fund that holds a collection of assets, like stocks, bonds, or even a single security. The key benefit? ETFs are traded on the stock exchange, so they’re easy to buy, sell, and manage—making them more liquid than traditional funds, which can be harder to get in or out of, especially if you want to sell.
Investors love ETFs for their diversification—think S&P 500 Index ETFs—and for their flexibility. The global ETF market has been growing at nearly 20% annually, now reaching over $11 trillion in value.
Crypto ETFs: What’s Changed?
Crypto ETFs have faced a bit of an uphill battle due to regulatory concerns and the volatility of digital assets. Until recently, U.S. regulators, like the SEC, were sceptical, and Bitcoin ETFs faced rejection after rejection. But in January 2024, something big happened: eleven crypto ETFs were approved, including some from major financial players like BlackRock and Fidelity. This new approval sent ripples through the market.
Crypto ETFs initially surged in early 2024, hitting a stall for several months alongside the wider crypto market. However, recently as political and market confidence grew, ETFs saw a renewed spike in popularity, with inflows reaching $3 billion in just three weeks.
The rise of crypto ETFs has three major impacts:
If the current crypto rally continues, we’re likely to see even more financial institutions adding crypto to their portfolios. And here’s where it gets interesting: large-scale institutional buying could eventually create a shortage of tradeable Bitcoin. When that happens, the price of Bitcoin could soar, as demand outstrips the available supply. We’re already seeing this trend on exchanges, where the amount of Bitcoin for sale decreases as prices go up, as shown in CryptoQuant’s data.
The growing popularity of crypto ETFs signals a shift in the market that could work in your favor. As institutional demand drives scarcity and boosts the legitimacy of major coins like Bitcoin and Ethereum, these forces can translate into upward momentum for the coins you already hold.
In other words, the rise of ETFs isn’t just about new investment opportunities—it’s about the ripple effect they create, potentially amplifying the value of the crypto assets already in your portfolio.
Stay informed, stay invested, and let the market's evolution work for you.