Cryptocurrency ETFs: how to invest in digital assets through the stock exchange

In early 2024, the first cryptocurrency ETFs based on Bitcoin were launched, marking a new stage in the development of the crypto industry. The launch of ETFs became a significant event for the cryptocurrency market, as it opened the door to institutional investment and represented another step toward the mass adoption of digital assets.

As of September 2026, the total value of assets held in cryptocurrency ETFs exceeds $122 billion. Over the past month alone, net inflows into cryptocurrency ETF funds totaled about $5.7 billion.

What are cryptocurrency ETFs?

The abbreviation ETF stands for Exchange-Traded Fund. An ETF is an investment fund whose units, or shares, trade on a stock exchange like ordinary securities. Such a fund pools investors' money and invests it in a specific set of assets. ETFs may focus on stocks, bonds, commodities, currencies, precious metals, individual sectors of the economy, stock market indices, and cryptocurrencies and related financial instruments.

In the context of cryptocurrencies, an ETF allows investors to gain exposure to the price movements of crypto assets through traditional exchange infrastructure, without having to buy and store cryptocurrencies themselves.

The lack of clear, transparent rules in the cryptocurrency market discouraged some traders and investors, who were reluctant to invest their funds in unregulated assets. The launch of cryptocurrency ETFs on traditional exchanges removed this obstacle, laying a solid foundation for the further development of the digital asset market.

The first attempts to launch cryptocurrency ETF funds were made as early as 2013. Gemini founders, the Winklevoss brothers, submitted the first application to launch a Bitcoin ETF to the U.S. Securities and Exchange Commission (SEC).

However, at the time, the regulator rejected the proposal to launch the ETF due to concerns over fraud involving the new asset class, the high volatility of the cryptocurrency market, and the lack of legal protection for investors.

Other attempts to launch cryptocurrency-based ETF funds also failed. Well-known investment companies VanEck and Grayscale submitted applications to launch cryptocurrency ETFs between 2017 and 2019, but regulators also rejected them.

The first breakthrough in the development of the ETF market came in 2021 outside the United States. Two Bitcoin-based cryptocurrency ETFs were launched at once: the Purpose Bitcoin ETF (BTCC) in Canada and another ETF fund in Brazil.

In January 2024, the U.S. regulator approved the launch of ETF funds based on the Bitcoin cryptocurrency for the first time, with trading beginning that same month. The issuers of BTC ETFs included well-known investment companies such as BlackRock, Bitwise, Fidelity, and VanEck.

Moreover, the launch of BlackRock's Bitcoin-based cryptocurrency ETF became the largest in the history of financial markets: trading volume exceeded $1 billion on the very first day. Bloomberg described the event as the "greatest launch in ETF history." In just the first three months, net inflows into Bitcoin ETFs exceeded $11 billion.

In July 2024, the regulator approved the launch of cryptocurrency ETFs based on the leading altcoin Ethereum. As of September 2026, seven cryptocurrency ETF funds have been launched with Bitcoin-ETF and Ethereum-ETF:

XRP ETF;
Solana ETF;
HYPE ETF;
Litecoin ETF;
Dogecoin ETF.

There are also plans to launch ETF funds based on the following altcoins:

If they are launched in the near future, the total number of cryptocurrency ETFs will exceed 10. In a CoinGecko report, analysts note that the launch of new cryptocurrency ETFs will further strengthen the connection between the cryptocurrency market and traditional finance, which could trigger a new wave of institutional investment in the crypto industry.

The impact of cryptocurrency ETFs on the industry and the risks

The very fact that cryptocurrency-based ETFs were launched marked a new stage in the development of the crypto market: from that point onward, the cryptocurrency sector began to become increasingly integrated with traditional finance.

For investors, cryptocurrencies evolved from a high-risk, poorly understood asset into a regulated, exchange-traded instrument. The main problem was not so much the reputation of Bitcoin and altcoins as the infrastructure required to work with them: investors had to register on cryptocurrency exchanges, understand the specifics of buying and transferring digital assets, choose methods for storing them, and independently account for risks related to wallet security and the safekeeping of access keys. The launch of regulated ETF funds made it possible to remove these barriers.

In other words, the launch of ETFs allowed investors and traders to gain exposure to cryptocurrency assets through familiar exchange infrastructure — brokerage accounts and regulated stock exchanges that are already used to trade traditional financial instruments, including stocks, gold, oil, and stock market indices.

Since the launch of ETF funds, cryptocurrencies have finally ceased to exist as isolated instruments and have become part of the global financial industry, beginning to compete with major asset classes such as gold, stocks, and bonds.

On the other hand, cryptocurrency ETFs create risks for the decentralization of the industry due to the high concentration of cryptocurrencies in large funds such as BlackRock, VanEck, Bitwise, and others.

According to Coinglass, funds already hold more than $122 billion worth of Bitcoin and altcoins. Although this figure still represents less than 5% of the total cryptocurrency market capitalization, which exceeds $2.7 trillion as of September 2026, it continues to grow. Over the past year alone, the total value of assets held by cryptocurrency ETFs has more than doubled.

Experts are concerned that the growth of crypto assets held in the wallets of major ETF funds could lead to greater centralization of cryptocurrencies. Investors who trade cryptocurrency ETFs do not, in effect, own the underlying assets themselves; instead, they delegate custody of the actual coins to the funds.

ETFs do not give investors direct control over the cryptocurrency underlying the fund. By purchasing shares or units of such a fund, an investor receives an exchange-traded instrument whose value depends on the underlying crypto asset, but not the cryptocurrency itself. The digital assets are held by the ETF fund, which means that the ETF holder does not have access to private keys, cannot withdraw the cryptocurrency to their own wallet, or independently use it on the blockchain. As a result, most of the opportunities available in decentralized finance (DeFi) are unavailable to them, for example:

Staking*;
Liquidity mining and yield farming*;
Lending;
Liquid staking;
Restaking* and others.

* Staking is a mechanism for participating in the operation of blockchain networks that use the Proof-of-Stake consensus algorithm and its variations. A user locks a certain amount of cryptocurrency to help secure the network, validate transactions, and create new blocks. In return, they receive rewards in crypto assets. In a broader sense, the term "staking" is also sometimes used to describe depositing tokens in certain crypto services and DeFi protocols to generate yield. However, technically, such mechanisms may have no connection to securing the operation of a blockchain.

* Farming is a way of earning income by deploying crypto assets across various decentralized protocols. A user may provide liquidity for token swaps, deposit assets into lending protocols, or contribute them to pools. Rewards may come from protocol user fees, interest on loans, distributed tokens, and other incentives.

* Restaking is a mechanism in which crypto assets that are already being used for staking are reused to help secure other networks, protocols, or services. This allows asset holders to earn additional rewards on top of their base staking income.

In addition, since traditional ETF funds operate within a regulated legal framework, regulators gain the ability to exert additional pressure on crypto investors, ranging from freezing accounts to prohibiting certain transactions.

Thus, investors in cryptocurrency ETFs have to choose between convenience and legal protection on the one hand, and full control over their digital assets on the other.