Summary The good news is that ETFs have gained significant popularity in a little over a year and a half. The GENIUS Act became law on July 18, 2025, creating the first federal framework for payment stablecoins. The House also passed the CLARITY Act and the Anti-CBDC Surveillance State Act. These signal broader policy alignment even as the Senate process continues. In addition to the U.S. strategic reserve, Texas has been the first state to establish the Texas Strategic Bitcoin Reserve. By Roxanna Islam, CFA, CAIA A few weeks ago, I wrote this research note on how regulatory support for bitcoin (BTC-USD) and the broader crypto universe would be a game-changer for the crypto ETF industry. The past month has reinforced that view. Flows have accelerated and adoption is broadening across retail investors and institutional investors. Adoption trends are increasing According to a recent VettaFi live poll during our Alternatives Symposium with CoinShares, over half of advisors said they’re either slightly more or significantly more interested in allocating to bitcoin in a more regulatory-friendly environment. That “friendliness” is now tangible: The GENIUS Act became law on July 18, 2025, creating the first federal framework for payment stablecoins. The House also passed the CLARITY Act (market-structure clarification) and the Anti-CBDC Surveillance State Act (limiting a Federal Reserve CBDC). These signal broader policy alignment even as the Senate process continues. Meanwhile, the SEC has continued to smooth the processes behind crypto ETFs. This includes approving in-kind creations/redemptions for crypto ETFs and making progress on an approval framework. ETFs have already accelerated adoption for both retail and institutions. Yet there are still frictions to solve — particularly uneven availability across large platforms and lingering investor misperceptions. Those barriers are shrinking as policy, operations, and custody converge. The impact of ETFs continues to grow The good news is that ETFs have gained significant popularity in a little over a year and a half. The two iShares spot ETFs - the iShares Bitcoin Trust ( IBIT ) and the iShares Ethereum Trust ( ETHA ) - have rapidly grown into category leaders by assets, liquidity, and brand recognition. These funds now sit among the largest in their respective asset classes. Out of 4,400+ U.S. ETFs, IBIT is ranked 20 th by assets. This is an important signal, because larger funds tend to have higher liquidity (important for institutional investors) and stronger recognition (many investors who believe these names are most “trusted’ because they are the largest). But as with all funds, assets are a function of both shares and price. This technically means these products wouldn’t need net creations but could still grow assets just because the price of bitcoin has increased over 20% this year. Net flows are a better indication of actual demand. And net inflows have also been significantly higher this year. IBIT has over $20 billion in net inflows year-to-date, the fifth highest in the 4,400+ universe. ETHA is 18 th, with over $6 billion in net inflows. On a one-month basis, IBIT and ETHA had the third- and fourth-largest net inflows, respectively, after large core ETFs like the Vanguard S&P 500 ETF ( VOO ) and the iShares Core S&P 500 ETF ( IVV ) Who is buying bitcoin ETFs? There has been increased demand across both retail and institutional investors. But retail investors have continued to shine. Most of these are self-directed retail investors. And iShares cites an interesting fact in its 2025 Investor Day: There are 925,000 IBIT investors and 75% of direct investors in IBIT were first time iShares users. This implies they likely aren’t avid ETF investors (at least beyond traditional core equity funds) but still prefer investing in bitcoin through ETFs. Considering the survey results above, which indicate that advisors are now more willing to allocate to crypto, more retail investors may be investing through advisors in the future. Institutional adoption has also increased. Recent 13F filings show that Harvard’s endowment has a $117 million allocation to IBIT — its fifth-largest investment. But adoption is more than just allocating to bitcoin ETFs. It is fully embracing bitcoin and digital assets, which leads to further reaching implications. These include legitimizing bitcoin in financial markets and increasing adoption among large wirehouse brokers that still have restrictions to investing in crypto ETFs. Demand grows broadly — not just in traditional portfolios There are more ways that institutions, corporations, and the government support crypto ETF demand: Product innovation There are many factors to consider when filing a new ETF launch. These include knowing what investors currently want, predicting what investors want in the future, filing innovative products, or filing for similar products with a notable differentiator or lower fee. Whatever perspective you look at, there have been plenty of crypto ETF launches so far this year. There have been 39 ETF launches through August 8, 2025. In 2024, there were around 43 ETF launches (including conversions). This means there will likely be more launches in 2025 over the next few months (including the expected wave of alt-coin spot ETF approvals and multitoken funds). Strategic allocations It’s no longer just about holding bitcoin in a portfolio. Many corporations are now holding bitcoin long term as a Treasury asset (and some companies are even starting to explore ethereum Treasuries). In fact, several ETFs have launched this year that focus on “Bitcoin Treasury companies” instead of the broader crypto equity space. The Bitwise Bitcoin Standard Corporations ETF ( OWNB ) launched in March. It includes companies with at least 1,000 bitcoin in their corporate Treasuries. The Grayscale Bitcoin Adopters ETF ( BCOR ) exhibits a similar strategy of tracking companies with at least 100 bitcoin on their balance sheet (a smaller hurdle than OWNB). The REX Bitcoin Corporate Treasury Convertible Bond ETF ( BMAX ) incudes convertible bonds issued by bitcoin Treasury companies. This is defined as companies holding 15% or more of assets in bitcoin/bitcoin-linked instruments, that derive 15% or more of income from bitcoin-related activities, or engage directly in bitcoin mining. Government support It is obvious that the current administration is very pro-crypto, especially given the amount of progress made in regulations discussed above. But factors like the executive order for a strategic reserve have real implications toward the acceptance of cryptocurrencies. In addition to the U.S. strategic reserve, Texas has been the first state to establish the Texas Strategic Bitcoin Reserve. It starts at the top - increasing government support and usage of cryptocurrencies is extremely significant for increasing broader adoption. Bottom Line For those who have been waiting on regulatory signals and institutional-grade wrappers, that wait is largely over. Acceptance for cryptocurrencies and cryptocurrency ETFs is growing among institutions, advisors, and retail clients. Disclosure: © VettaFi LLC 2025. All rights reserved. This material has been prepared and/or issued by VettaFi LLC ("VettaFi") and/or one of its consultants or affiliates. It is provided as general information only and should not be taken as investment advice. Employees of VettaFi are prohibited from owning individual MLPs. For more information on VettaFi, visit www.vettafi.com Original Post
