Crypto’s Circus: Altcoin ETFs and the Great Demand Illusion

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Crypto’s Circus: Altcoin ETFs and the Great Demand Illusion

It was a fine spring day in May, and Bitcoin, that old rogue, wagged its tail with a rally that seemed to suggest it had finally remembered its roots. Sentiment, that fickle goddess, fluttered its eyelashes in the crypto world, despite the gloomy skies cast by the US’s tariff tantrum, as if tariffs could scare away a marketplace of gamblers and dreamers.

But lo and behold, while Bitcoin flirted with a new peak on the 21st of May, most of the other coins—those poor, neglected altcoins—stayed down and out, probably dreaming of a future they would never quite reach. No, sir, these little ones seem unlikely to don their crowns again anytime soon, at least in the near future.

Altcoins used to dance better than Bitcoin during wild rides, or so the old stories say. Yet Suliman Mulhem, that learned man with a calculator, warns that Bitcoin still wears the crown of superior returns—despite the shiny promise of ETFs for altcoins that the financiers keep whispering about like a bedtime story. 🎭

“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.”

He went on, with the air of one who had seen too many charts and too few dinners, to explain that the big players—those corporate giants and ETF enthusiasts—will keep dominating the scene like grand old dukes. Even if the SEC, that overgrown gatekeeper, gives a nod to new altcoin ETFs, do not expect a flood of fresh enthusiasm. Most will yawn and sip their coffee.

“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.”

Why, you ask? Because altcoins, those troublesome relatives, lack a clear purpose, a value proposition that institutional investors can cling to like a life raft. They are the uninvited guests at the banquet, trying to prove they belong.

“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,” Mulhem explained, with a dry smile lining his words.

In short, even if the regulators wave their fancy paper and approve new ETFs, don’t hold your breath for a deluge of demand. These funds are more likely to serve as window dressing than as a real source of wealth.

“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,” said Mulhem, as if warning us that the circus is far from over, and the clowns are still in town.

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2025-05-22 00:25