State Street analysts have predicted that crypto exchange-traded funds (ETFs) could flip precious metals ETFs to become the US’s third-largest asset class among all ETF categories by the end of 2025. The bank, which is the world’s largest ETF servicer, based its prediction on the surging demand for crypto ETFs.
According to State Street’s global head of ETF solutions, Frank Koudelka, spot crypto ETFs’ growth has been unprecedented. However, he believes there is more room for growth, especially as more investment advisors are adding crypto ETFs to their portfolios.
Koudelka said:
“We have been very surprised by the speed of growth of crypto. I expected there to be pent up demand, but I didn’t expect it to be as strong as it was.”
Crypto ETFs have grown rapidly since the US Securities and Exchange Commission allowed spot Bitcoin ETFs last year. In less than 15 months, the product already has around $136 billion in assets under management (AUM).
Although this is below the $165 billion in AUM for precious metals, many experts believe that if crypto ETFs continue at this rate, they will soon surpass precious metals ETFs, putting them only behind equities and bonds ETFs.
ETFs for precious metals already enjoy a 20-year advantage, with the first spot gold ETF SPDR Gold Trust (GLD) launching in 2004.
State Street predicts that the SEC will approve more crypto ETFs in 2025
Meanwhile, State Street expects the SEC to finally approve ETFs for more digital assets this year. Only Bitcoin and Ethereum have spot ETFs, but the bank forecast that others in the top ten cryptocurrencies by market cap could also get spot ETFs this year.
Fund issuers have already set the process in motion with pending ETF applications for digital assets such as Solana (SOL), Cardano (ADA), Ripple (XRP), Litecoin (LTC), and even memecoins currently before the SEC. While the regulator has not taken any steps on the application, there are favorable signs already.
Over the past few weeks, the SEC has been settling lawsuits against several crypto companies, including Coinbase and Consensys, with reports that other pending litigations will soon be dropped. This move enables the SEC to change its stance on multiple crypto tokens categorized as securities under the Gary Gensler administration.
Additionally, further clarity is emerging on the status of crypto assets. The SEC issued guidance recently that memecoins are not securities, and President Donald Trump has announced that BTC, ETH, SOL, XRP, and ADA would form part of the proposed US crypto reserve.
Crypto ETFs could see more developments including in-kind redemptions
Beyond introducing more crypto ETF products, State Street believes there could be other developments for crypto ETFs this year. One of the expected improvements is the SEC’s approval of the in-kind creation and redemption of crypto ETFs.
Presently, the creation and redemption of crypto ETFs is done with cash only, as the SEC approved in January 2024. However, experts believe that the new SEC administration will be more open to in-creation redemption, which will be more efficient.
Nasdaq filed a proposed rule change with the SEC in January 2025 to permit in-kind creation and redemption for BlackRock IBIT. The proposed rule change will only allow authorized participants, who are institutional investors, to use this method.
There are also plans for crypto ETHs to allow staking, with 21Shares already filing a proposal to allow its Ethereum ETF to offer staking. The SEC has already acknowledged the proposal even though it has yet to make a decision.
Cryptopolitan Academy: Want to grow your money in 2025? Learn how to do it with DeFi in our upcoming webclass. Save Your Spot
