In 2025, crypto ETFs have a significant opportunity for innovation, but demand may be lacking.

Bitcoin ETFs experienced unprecedented demand in their first year, but crypto ETFs may not see the same level of demand in their second year, despite new funds and innovative approaches.

In 2024, exchange-traded funds (ETFs) debuted and were hailed as one of the most successful ETF launches in history, drawing $36 billion in net new assets in their first year, led by BlackRock's iShares Bitcoin Trust. These ETFs helped double the total market value of cryptocurrencies.

Bitcoin ETFs have seen strong demand, but the next crypto ETFs may not experience the same level of demand, according to JPMorgan. Applications for new funds tracking Bitcoin, Ethereum, Hedera (HBAR), and other cryptocurrencies have been submitted, but even if approved, they may attract only a fraction of the assets that flowed into Bitcoin ETFs. Additionally, there has been an application for a hybrid Bitcoin and Ether fund.

According to JPMorgan analyst Kenneth Worthington, in a note on Monday, there is no significant impact on the crypto ecosystem from the next wave of cryptocurrency exchange-traded product launches due to the smaller market capitalization of other tokens and lower investor interest.

The total bitcoin market capitalization is $1.8 trillion, and bitcoin ETFs account for 6% of it, which is $108 billion. In contrast, ether ETFs, launched in July, make up only 3% of ether's market cap, which is $12 billion, after six months of trading.

JPMorgan predicts that ETFs linked to Solana, with a $91 billion market cap, will draw between $3 billion and $6 billion of new assets, while a fund tracking XRP, worth $146 billion, will attract an estimated $4 billion and $8 billion in new assets.

The regulatory environment, particularly the anticipated pro-crypto Congress and White House in 2025, could influence the growth of crypto ETFs.

"The regulatory and legislative framework in the U.S. will determine the type, quantity, and focus of new products and services launched, according to the analyst. The new administration and SEC chairman have opened up new opportunities for innovation in the cryptocurrency space."

According to Tyron Ross, founder and president of registered investment advisor 401 Financial, the demand for bitcoin ETFs in 2021 will not match the expectations set for 2024, but it will still be "healthy." This is largely due to increased investor education and growing confidence in the 16-year-old digital asset class.

If bitcoin ETFs are added to Wall Street's model portfolios, adoption could accelerate, said he.

"Ross stated on CNBC that none of the portfolios contain crypto, so until crypto is included, the next leg of growth this year will not be observed. Most advisors purchase their models from a shelf, and these models do not have bitcoin or crypto exposure. When this is resolved, a parabolic growth like the one seen last year may occur."

He stated that although some regulatory clouds are clearing and blue skies are ahead, it is important to have tempered expectations for ETFs in the upcoming year.