Why do altcoins remain in the shadow of Bitcoin in the ETF world?

NEW YORK, March 2025 – The widespread introduction of ETF funds on US stock exchanges has its limitations, especially when it comes to altcoins. But what exactly is an altcoin? It’s any cryptocurrency other than Bitcoin – from Ethereum to Solana and thousands of smaller projects. Despite the theoretical appeal of diversified exposure, fundamental differences in market structure prevent altcoin funds from achieving the growth rates observed in Bitcoin funds.

The Number Problem: Bitcoin Controls, Altcoins Are Dispersed

First, the numbers. Bitcoin funds collectively control about 7% of the total circulating supply of Bitcoin – an astonishingly high share. Meanwhile, altcoin funds face a basic problem: there simply isn’t enough liquidity and available resources to accumulate significant positions without disrupting the market.

Ben Slavin, Global Head of ETFs at BNY Mellon, confirms this observation. The fundamental difference lies in the nature of the markets themselves. Bitcoin is a seventeen-year-old cryptocurrency veteran with established mining infrastructure and institutional trust. Altcoins? It’s chaos – hundreds of projects spread across different blockchains, each with different fundamental values and regulatory friendliness.

What is an Altcoin and Why Is It More Complex for ETFs

Before diving deeper: an altcoin is any digital currency besides Bitcoin. But the word “any” doesn’t capture the full complexity. Ethereum is a platform for decentralized applications. Solana is a token focused on speed. Cardano is a philosophy of peer review. Each has a different value proposition, a different development team, and varying regulatory acceptance.

This is precisely what makes creating ETF funds for altcoins more complicated than it might seem. Fund managers must navigate a labyrinth of compliance requirements for each cryptocurrency individually. The SEC treats Bitcoin clearly and transparently. Altcoins? It’s still a gray area.

Institutions Prefer Certainty Over Experimentation

Market analysts observe a clear pattern. Large pension funds, insurance companies, and corporations prefer to start with Bitcoin. It’s the first exposure, a testing ground. Altcoins are the second phase – if they happen at all.

Monica Long, President of Ripple Labs, points out the market reality: in 2025, over 40 new cryptocurrency ETFs were launched, but their combined share of the huge US ETF market is negligible. This indicates that institutions are only beginning to feel comfortable with cryptocurrencies as an asset class.

However, change is beginning. More and more large corporations are analyzing asset tokenization strategies. Real estate on the blockchain, commodities, patents – all creating a new niche for specialized altcoin funds. But the pace of change is crucial here.

Volatility and Interest: Contradictory Trends

Data shows an interesting paradox. In the short term, altcoin funds exhibit significantly higher volatility than Bitcoin ETFs. Investors jump in and out depending on the trend. It’s unstable, and it’s burdensome for managers.

However, long-term interest is growing. People are gradually understanding what altcoins are and what functions they can serve in a portfolio. Market education is slowly transforming the sector’s landscape.

Infrastructure vs. Potential

Bitcoin had fifteen years to build solid infrastructure. Mining farms, custodial solutions, relationships with regulators – everything in place.

The altcoin ecosystem is decentralized by nature. Ethereum has its community and developers. Solana does its thing. Cardano is seeking its applications. This diversity is a strength in innovation but a weakness for ETF creators aiming to offer simple, broad exposure.

Additionally, each altcoin requires a different regulatory approach. Securities laws are applied differently depending on whether the regulator considers a given token a security or a commodity. This adds extra cost and complexity for fund sponsors.

The Future: Technology Could Change the Game

Things are changing. Layer 2 solutions, cross-chain bridges, and scalability enhancements increase the usability of altcoins. This could support broader institutional adoption in the future – though probably more slowly than Bitcoin.

Investor education plays a key role. The better people understand what altcoins are and their potential uses, the more sophisticated their investment decisions become. This, in turn, drives the development of more advanced ETF products.

Tokenization of traditional assets is also changing the landscape. New funds could serve markets for tokenized real estate, commodities, or intellectual property rights. These are potential growth vectors for specialized altcoin funds.

Summary: Different Paths for Different Times

Altcoin ETFs face fundamental limitations that Bitcoin does not. Supply constraints, market fragmentation, regulatory uncertainty – these are not insurmountable obstacles in the short term.

But the overall picture isn’t black. Interest is growing, technology is advancing, and education is progressing. Realistically, altcoins will grow – but on a different trajectory than Bitcoin. Slower, more cautiously, with institutional analysis guiding each step.

Today, Bitcoin remains the king of cryptocurrency ETFs. Altcoins are promising but still young companions alongside it.

Answers to Common Questions

How much of the total Bitcoin supply do Bitcoin ETFs hold?
About 7% of the total circulating supply, according to BNY Mellon’s analysis.

Why is the concept of altcoin challenging for ETFs?
Because altcoins are a highly diverse group of assets with different fundamentals, liquidity, and regulatory status. This causes scalability and position-collecting issues.

How many cryptocurrency ETFs were launched in 2025?
Over 40 new funds, but their share of the entire ETF market remains negligible.

What factors reduce volatility in Bitcoin ETFs?
Bitcoin’s long history, clear regulatory frameworks, broader institutional acceptance, and more mature market infrastructure.

How can broader ETF adoption accelerate corporate entry?
By offering regulated, familiar investment instruments that enable exposure to digital assets within formalized asset management strategies.