The altcoin ETF wave is coming! Ethereum raised 9.6 billion in the third quarter, surpassing Bitcoin.

Market analysts indicate that as the next wave of Crypto Assets exchange-traded funds (ETFs) enters the U.S. market, institutional investors may shift their attention towards alts. In the third quarter of 2025, the Spot Ethereum ETF attracted $9.6 billion in inflows, surpassing the Spot Bitcoin ETF's $8.7 billion, suggesting that the demand for regulated altcoin investments is gaining momentum.

Q3 Ethereum ETF inflows surpass Bitcoin for the first time

(Source: SoSoValue)

In the third quarter of 2025, Spot Ether ETFs attracted $9.6 billion in capital inflows, surpassing the $8.7 billion of Spot Bitcoin ETFs. According to data aggregator SosoValue, this is the first time since the launch of Ether ETFs that the capital inflows in a single quarter have exceeded those of Bitcoin ETFs. This shift indicates a growing institutional demand for alternative Crypto Assets investments, laying the groundwork for the launch of altcoin ETFs.

Ethereum ETF inflows have surpassed Bitcoin, driven by multiple factors. First, the continuous expansion of the Ethereum ecosystem is evident. The rebound in DeFi locked value, the increased usage of Layer 2 networks, and the recovery of the NFT market all indicate that the value of Ethereum as a smart contract platform is being re-recognized. Secondly, the allocation logic of institutional investors has evolved. After completing their initial allocation to Bitcoin, institutions are seeking more diversified exposure to crypto assets. Ethereum, being the second-largest cryptocurrency with practical application scenarios, naturally becomes the preferred choice.

From a technical indicator perspective, Ethereum's on-chain activity, trading volume, and developer count are expected to maintain steady growth in 2025. These fundamental improvements provide confidence to institutional investors, making them willing to rotate funds from Bitcoin ETF to Ethereum ETF. In addition, the PoS mechanism and lower energy consumption after the Ethereum 2.0 upgrade also align better with ESG (Environmental, Social, and Governance) investment standards, which are important considerations for many institutional investors.

Leon Waidmann, the research director of the Web3 analytics company Onchain, stated that each approval could “open the door for the next wave of institutional purchases.” He told Cointelegraph, “After Bitcoin and Ethereum ETFs have proven institutional demand, the inflow of funds into altcoin ETFs is the inevitable next step. This is a manifestation of regulatory confidence translating into capital flows.”

Waidmann's argument is clearly logical: Bitcoin ETF breaks the first psychological barrier for institutional investment in Crypto Assets, proving that digital assets can enter traditional portfolios through compliant channels. Ethereum ETF further expands this logic, showing that institutions accept not only Bitcoin but also other Crypto Assets with practical application scenarios. Once these two precedents are established, ETF applications for alts like Solana, XRP, and Cardano will be easier to approve, and capital inflows will be easier to achieve.

Waidmann stated that this trend could position altcoin ETFs as a new regulated tool, catalyzing the next wave of institutional adoption of alts, leading to years of sustained capital inflow. “Institutional investors initially discovered Bitcoin through ETFs, and now they are turning to Ether, and next, they will invest in other alts.” This rotation pattern is similar to the flow of funds in the retail market, just on a larger scale and potentially at a slower pace.

5 alts ETF applications for smart money to layout in advance

Despite the ongoing government shutdown hindering progress, the U.S. Securities and Exchange Commission (SEC) has received at least 5 new altcoin ETF applications in the first half of October. These applications cover multiple mainstream altcoins, including Solana, XRP, Litecoin, Hedera, and Cardano. Each application represents a recognition of the long-term value of these tokens by traditional financial institutions, as applying for and operating an ETF requires significant legal, compliance, and operational costs.

The most successful traders in the industry (tracked as “smart money” traders on Nansen's blockchain intelligence platform) are also preparing for the approval of altcoin ETFs. Nansen's data shows that on Thursday, Uniswap (UNI), Aave (AAVE), and Chainlink (LINK) are the altcoin tokens held most by smart money traders. These tokens share common characteristics: they are leaders in their respective fields, have solid technical fundamentals, and possess larger market capitalizations and liquidity.

Three Major Altcoins Backed by Smart Money

Uniswap (UNI): The leading decentralized exchange with trading volume exceeding centralized exchanges.

Aave (AAVE): The leader in DeFi lending protocols, with continuously growing locked assets.

Chainlink (LINK): The oracle network leader, providing price data for hundreds of projects.

The position choices of smart money traders often have leading indicator significance. These professional traders usually have deeper market insights and earlier information acquisition channels. Their large-scale accumulation of UNI, AAVE, and LINK may indicate that they expect these tokens to be among the next batch of alts to gain ETF approval, or at least the best-performing coins during the altcoin season.

From the perspective of the feasibility of ETF applications, UNI, AAVE, and LINK all have a high probability of approval. Their market capitalizations are in the range of billions to tens of billions of dollars, with ample liquidity, and they are traded on multiple mainstream exchanges. More importantly, they all have clear utility functions and sustainable business models, rather than being purely speculative tokens. This solidity in fundamentals makes it easier for regulators to approve their ETF applications.

However, there are currently no formal ETF applications for these three tokens publicly available. The advance layout of smart money may be based on insider information or forward-looking judgments about market trends. If the ETFs for Solana, XRP, and others that have already submitted applications are approved and succeed, the ETF applications for UNI, AAVE, and LINK may follow soon.

Concerns over BlackRock's Absence and Expectations of Fund Inflows

(Source: Vetle Lunde)

However, some analysts are concerned that BlackRock's absence from altcoin ETFs will lead to limited overall capital inflow, as BlackRock's Bitcoin ETF has accumulated $28.1 billion in investment so far in 2025, making it the only fund with positive year-to-date (YTD) capital inflow. According to K33 research director Vetle Lunde, excluding BlackRock's fund, the Spot Bitcoin ETF has seen a net outflow of $1.27 billion year-to-date.

This statistical data reveals an astonishing fact: BlackRock's IBIT is not only the most successful Bitcoin ETF but also the only product that has truly attracted net inflows. All other Bitcoin ETFs, in total, have instead seen net outflows. This extreme level of concentration shows that institutional investors are extremely selective about ETF issuers, and BlackRock's brand, scale, and expertise are key to its success.

BlackRock's absence from the altcoin ETF wave may indeed limit cumulative capital inflows and its potential positive effects on the underlying tokens. If the issuers of the Solana ETF and XRP ETF are second or third-tier asset management companies, it may be difficult to attract large-scale institutional funds. When allocating emerging assets, institutional investors often trust leading brands more. The participation of giants like BlackRock, Fidelity, and Vanguard is an important guarantee for the success of ETFs.

However, this does not mean that altcoin ETFs are doomed to fail. While Bitwise and Grayscale are not as large as BlackRock, they have deep experience and a good reputation in the crypto space. The Solana ETF launched by Bitwise attracted over $300 million in assets within just a few days, thanks to a 7% staking reward, proving that innovative product design can compensate for brand disadvantages. If altcoin ETFs can offer unique value that Bitcoin ETFs do not possess (such as staking yields, DeFi exposure, or specific industry exposure), they may still attract significant capital inflows.

In the long term, BlackRock may not remain permanently absent from altcoin ETFs. As the world's largest asset management company, BlackRock's strategy is cautious yet comprehensive. They first introduced a Bitcoin ETF to test market reactions, and after success, they will launch an Ethereum ETF. Following the same logic, when altcoin ETFs like Solana and XRP prove to have sufficient demand, BlackRock may launch its own version. At that time, with its brand and channel advantages, BlackRock's altcoin ETF could quickly become the industry benchmark.

Regulatory confidence translates into capital flow

Researchers explain that, based on the dynamics of Bitcoin ETF investments, BlackRock's absence from the altcoin ETF wave may limit cumulative capital inflows. However, Waidmann believes: “This is a manifestation of regulatory confidence translating into capital flows.” The SEC's willingness to approve altcoin ETF applications itself represents a significant shift in regulatory attitude. During the Gensler era, the SEC was skeptical of all crypto assets except Bitcoin and Ethereum, believing they might be securities. Now, the SEC, led by Atkins, is beginning to approve altcoin ETFs, indicating a shift in regulatory philosophy from “restriction” to “open under regulation.”

Institutional investors initially discovered Bitcoin through ETFs, and now they are turning to Ethereum, followed by investments in other alts. This gradual acceptance process aligns with the decision-making logic of institutional investment. Institutions do not rush into unfamiliar territory all at once; rather, they test the waters with small allocations and expand once they have accumulated sufficient experience and confidence.

The launch of the altcoin ETF will provide institutions with a low-threshold and highly compliant investment channel for altcoins. Traditional institutions such as pension funds, university endowments, and family offices are unable to directly purchase and custody crypto assets due to regulatory requirements, but they can participate through ETFs. The opening of this compliant channel could trigger the inflow of hundreds of billions or even trillions of dollars of institutional funds into the altcoin market.

Investors should closely monitor the performance of the first batch of altcoin ETFs such as Solana and XRP. If they can replicate the success of the Bitcoin ETF during its initial launch, it will validate the market demand for altcoin ETFs and pave the way for the subsequent launch of more altcoin ETFs.