Crypto ETFs Race to $100 Billion in Assets—What's Next?

The crypto ETF boom took 2024 by storm, led by the blockbuster launch of spot Bitcoin ETFs. But as the dust settles, industry insiders ask: What’s next?

At the Exchange conference in Las Vegas, Bloomberg Intelligence’s Eric Balchunas sat down with Matt Kaufman of Calamos Investments and Samir Kerbage of Hashdex to unpack the rise of crypto ETFs and the road ahead.

“This is the fastest-growing ETF category ever,” Balchunas said. “It’s still only 1% of ETF assets, but it’s taken up about 50% of my brain.”

Demand Beyond Expectations

Kerbage, whose firm Hashdex was an early entrant in the crypto ETF space, said the launch of spot Bitcoin exchange-traded funds exceeded expectations.

“We expected huge demand, but the level of institutional activity was a big surprise,” he said. “From day one, hedge funds started trading, and then we saw a lot of whales—big holders of Bitcoin—move their positions into ETFs because they preferred the traditional financial infrastructure.”

On the other hand, Kaufman wasn’t surprised by the flows per se, but by where they were coming from.

“I wasn't surprised by the asset flow, but I was surprised by who was actually using these ETFs. Retail and hedge funds jumped in quickly, but we’ve seen a lot of advisors still figuring out their crypto strategies—how much to allocate and whether to use spot exposure.

“I would have expected more growth coming from the financial advisory community,” he added.

Advisors Play Catch-Up

Even as crypto gains traction, many financial advisors remain cautious.

“What we’ve seen is about 96% of advisors say their clients are asking about Bitcoin, but only 20% are actually using it,” said Kaufman. “Adoption has doubled [over the past year], but there’s still a lot of room to grow.”

Kerbage emphasized that education remains critical, especially when talking to skeptical investors.

“We like to think of crypto as an emerging asset class, like the internet in the 1990s,” he said. “It’s volatile but full of potential. A small allocation in a long-term portfolio can make a big difference.”

He added: “The difference between poison and medicine is the size of the dose. That’s the same for crypto.”

Buffering Bitcoin’s Bumps

To address volatility concerns, Calamos offers buffered crypto ETFs—products designed to limit downside while still offering upside participation.

“Bitcoin returns look like a smile—big upside, big downside,” Kaufman explained. “Our floor-based products let you choose how much to put at risk. [For instance], you’re exposed to the first 10% [downside] but protected below that.”

Balchunas dubbed the approach “Bitcoin with bubble wrap”—a way to make crypto more palatable to risk-averse investors.

Behavior, Not Just Blockchain

When asked about the biggest risks in crypto, Kerbage pointed to investor psychology.

“Behavioral bias is the biggest risk,” he said. “This is an asset class that can go up 50% in a few days. That creates FOMO, bubbles and crashes. Advisors need to help clients manage those emotions.”

So far, crypto ETF holders have been unfazed by short-term volatility.

“We’ve been doing this outside the U.S. for years, and we’ve seen the same thing,” Kerbage said. “Most investors go in knowing this is a volatile, long-term asset. In the U.S., even after 15% [to] 20% pullbacks, 95% of the assets have stayed in place.”

Beyond Bitcoin ETFs

While Bitcoin commands most of the attention—and assets—Kerbage believes the broader crypto space holds just as much promise.

"The SEC has to set a bar," he said. "Right now, we're seeing filings for everything—including meme coins like Trump and Melania. The regulator needs to define what's in bounds."

Kerbage expects new ETFs focused on individual crypto assets to slowly roll out over the coming months and years. While they'll have a tough hill to climb to challenge spot Bitcoin ETFs in terms of assets, he thinks another category of crypto funds will eventually top those tied exclusively to Bitcoin.

"Bitcoin is like email in the '90s," he explained. "It's the killer app right now, but it won't be the thing that creates the most value long term."

Kerbage didn't specify which crypto assets will be the biggest winners, but he hinted that indexing could be the way to ensure that investors' portfolios capture the upside from crypto innovation in general.

Hashdex, in partnership with Nasdaq, has developed a strict eligibility framework for a broad crypto index called the Nasdaq Crypto Index.

"In five or 10 years, we think crypto index ETFs will be more significant than single-asset ETFs," Kerbage concluded.