In today’s edition, Miguel Kudry from L1 Advisor’s direct ownership of cryptocurrency vs. The exchange -traded and wrapped funds and how they are expected to develop through 2025.
Then the herds of Enochs from Index Coop answer questions about the subject in ASK and Expert.
– Sarah Morton
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The lines between Spot Crypto ETFs and direct ownership are blurred in 2025
The year 2024 marked a central moment of the cryptocurrency market with the launch of Bitcoin and Ether Spot Exchange-Traded Funds (ETFS), which quickly became some of the fastest growing ETFs in history. According to various reports overall global crypto ETPs over $ 134 billion in assets under management (AUM) in November 2024. This success was remarkable, even during the initial restriction of cash redemptions and contributions in the United States, a condition imposed by SEC During 2024 approvals. However, the landscape is set to develop further in 2025 with expected changes in redemption mechanisms.
The shift to redemptions in nature
SEC’s decision in 2024 not to allow redemptions and contributions in nature meant that only cash could be used to buy or sell ETF shares, which somewhat limited the potential of these financial products. This restriction is ready to change in 2025 with expectations that regulatory organs allow in-kind transactions to spot crypto ETFs. Blackrock has already submitted a rule change to enable redemption in nature for its Bitcoin Etf. This change allows authorized participants to issue and redeem shares directly with Bitcoin or Ether rather than cash, which will create a new liquidity flywheel between traditional funding (tradfi) and decentralized funding (defi) ecosystems.
Influence on investors
The cash procedure that previously existed left billions in cryptocurrency assets on the sidelines. Crypto-native investors, especially those with a low-basis assets, hesitated to convert their inventory to ETFs because of the significant tax liabilities. With redemptions in nature, these investors could move parts of their crypto wealth to ETFs without the immediate tax burden and thus gain access to a wider range of traditional financial services such as uncollateralized loans, mortgage loans and private banking.
For traditional investors who have been exposed to cryptocurrencies through ETFs, the shift to redemptions in nature gives an opportunity to dive deeper into the crypto ecosystem. These investors, after seeing significant appreciation in their ETF holdings (Bitcoin, were, for example, appreciated at around $ 46,800 at the time of the ETF launch in January 2024, and Ether to about $ 3,422 in mid-July 2024) , can now convert their ETF shares into direct crypto holdings to explore defi products without needing new capital or against tax consequences.
Catalysts for change
The recent withdrawal of the staff’s accounting bulletin # 21 (SAB-21) is another significant development. This will free up financial institutions from registering digital assets as obligations on their balance, and encourage more banks and brokers to engage in crypto-detention and develop crypto-native financial products. An example of this trend is Coinbas’s recent launch of a Bitcoin-supported lending product in partnership with Morpho Labs that utilizes Defi to support loans with Bitcoin. This year we should expect to see a wave of traditional financial institutions by this path.
At the same time, a segment of investors weighs against self-insurance and prefers to manage their assets independently to access crypto-native products without intermediaries. This trend emphasizes the importance of user -friendly and secure self -insurance solutions in the evolving crypto arcade.
Convergensen of Tradfi and Defi
2025 is formed to be when the boundaries between traditional and decentralized funding become more and more blurred. With mechanisms such as in-kind transactions and favorable legislative changes, investors are likely to interact with crypto-native platforms more seamlessly, often unintentionally. This convergence is expected to improve the influx of both sectors, increase volume and create a more interconnected and floating market.
Finally, the development from ETF to direct ownership in the crypto area is not just about investment choices, but about how these financial instruments reshape investor behavior and market dynamics. With redemptions on the horizon and legislative changes such as withdrawal of SAB-21, 2025 will mark a significant chapter to integrate cryptocurrencies into mainstream funding, further blurring the lines between traditional and on-chain financial rails.
– Miguel Kudry, CEO, L1 Advisors
Ask an expert
Question: What separates crypto ownership on chain except for traditional ETFs?
24/7 Market access is just the starting point. Ownership on the chain unlocks true composibility-what provides investors to use assets as security, earn yields and participate in decentralized ecosystems. While ETFs provide exposure, assets on the chain provide unmatched flexibility and utility.
Question: How to improve direct custody of crypto -active investor flexibility compared to ETFs?
Have you ever tried to transfer possessions from one broker to another? How long did it take? Was it a nightmare of friction? Probably. With on-chain crypto ownership you have full control. You can self -defense your assets, deposit them with custodians and move them in and out in minutes. What if an option arises and you have to act quickly? You can immediately get liquidity by selling or borrowing against your assets – no one waits, no trouble, just action when needed.
Sp. Will AI agents for the future prefer ETFs or tokenized assets on-chain?
Imagine an AI agent that manages investment. To buy an ETF, it is necessary to navigate KYC processes, work through a broker’s limited hours and depend on human intermediaries. Tokenized assets on the chain eliminate these barriers that offer 24/7 access, trouble -free automation and composibility to maximize efficiency. For AI-run financial systems, the choice will be clear: Defi.
– Crews Enochs, Ecosystem Growth Lead, Index Coop
Continue to read
- President Donald Trump signed a crypto order to set a federal agenda to move us digital assets, companies for friendly supervision.
- Arizona Bitcoin Strategic Reserve Bill moves to the next phase after Senat’s Finance Committee approved it on Monday.
- The US Senate of Digital Assets was formed by Wyoming Senator Cynthia Lummis, Congress’s most vocal spokesman for cryptocurrency.
