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Crypto Daily 2025-05-21 21:17:53

Altcoin ETFs Won’t Create ‘Material Demand from Institutional Investors’ – Analyst

Bitcoin’s rally in May has led to improved sentiment in the crypto space, despite persisting macroeconomic concerns stemming from US President Donald Trump’s aggressive tariff policy. However, although Bitcoin briefly set a new all-time high on 21 May, most altcoins are still considerably down and look unlikely to retest their all-time highs in the near-term. Altcoins have historically outperformed Bitcoin during sharp rallies and risk-on periods, but Suliman Mulhem, a financial analyst, has cautioned that BTC is set to deliver superior returns this cycle despite altcoin ETFs being on the horizon. “Although some altcoins, such as Ether, have outperformed Bitcoin on its recent leg up since the start of May, it’s almost certain that BTC will deliver a higher return – certainly on a risk-adjusted basis – than the vast majority of alts on longer time frames,” Mulhem said. “This is primarily because Bitcoin’s rally from around $45,000 at the start of 2024 to over $106,000 as of mid-May 2025 has been driven almost entirely by strong demand from corporations that have adopted a BTC accumulation programme, such as Strategy and Metaplanet, and institutional investors who have been scaling their exposure to Bitcoin via ETFs.” Continuing, Mulhem explained that corporations and ETFs are set to continue to dominate the market, and argued that even if additional altcoin ETFs and ETPs are approved by the SEC, this will not translate into significant new demand for altcoins. “Corporations and institutional investors are poised to indefinitely remain the largest net buyers of Bitcoin, perhaps only being rivalled eventually by governments and central banks who opt to create their own strategic BTC reserves,” he said. “While there are dozens of spot ETFs and other exchange-traded products (ETPs) for altcoins pending approval in the US, they are likely to only attract meagre inflows even if the SEC green-lights them.” Highlighting why ETFs won’t create significant new demand for altcoins, Mulhem argued that altcoins don’t have a place in institutional investors’ portfolios. “This is because all altcoins lack a clearly defined value proposition for institutional investors, corporations and governments. “This contrasts with Bitcoin, which is already being viewed as ‘digital gold’ mainly due to its limited supply and perceived value as a hedge against fiat currency debasement and sovereign debt risk, while also delivering huge upside during ‘risk-on’ periods. “Therefore, although the widespread approval of new ETFs and ETPs will provide institutional investors with access to altcoins, we shouldn’t expect these new funds to directly create material new demand, and they are unlikely to be a significant source of buying pressure for the foreseeable future. “As such, altcoins are set to remain almost entirely reliant on retail investors, whose participation levels are yet to return to the peak levels we saw during the 2021 bull run.” Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.

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