Bitcoin ETFs and Beyond: TradFi’s Role in Shaping Crypto’s Future
In Brief
In 2024, the crypto industry gained legitimacy and recognition, with Bitcoin and Ethereum ETFs launching on Wall Street. However, TradFi’s entry into the crypto space will significantly impact the industry.
Years of waiting paid off in 2024: the crypto industry finally got legitimacy and wide recognition. The crypto space finally got its own place in the market, with spot Bitcoin and Ethereum ETFs making their launch on Wall Street and more institutions getting involved. However, as 2025 goes on, the truth about traditional finance’s (TradFi) role is starting to sink in, which will have huge effects on the environment of digital assets.
At the start of every new year, people in the industry look at what the new trends are, and this year is no different. 2025 looks like it will be full of exciting events, from Ethereum’s latest update to a rise in venture capital interest. But one story stands out: TradFi’s entry into the crypto space will change everything.
A Breakout Year for Crypto in 2024
An important milestone in the evolution of cryptocurrency was the introduction of spot Bitcoin ETFs, which bridged the gap between the conventional financial markets and the digital asset sector. Just in 2024, Bitcoin ETFs got over 1.1 million BTC in assets under management, showing the immense demand for digital assets among institutional investors.
Meanwhile, mining companies like Riot Platforms and large-scale investment firms like MicroStrategy are increasing their Bitcoin holdings. Of these, Riot Platforms is seeking to raise $500 million to further expand its Bitcoin holdings, and Binance had a record-breaking year with $21.6 billion in deposits.
Bloomberg crypto expert Eric Balchunas also reports that the largest cryptocurrency exchange in the world, Binance, currently has 42% less Bitcoin than U.S. spot Bitcoin ETFs.
In 2024, the crypto world grew very quickly. One reason for this was the long-awaited arrival of spot Bitcoin and Ethereum ETFs on Wall Street. Even though these changes were a big step forward, experts like the FTX’s Ryne Miller say the industry hasn’t yet felt “the full effects” of Wall Street’s power.
Wall Street Yet to Enter the Race
ETFs, including giants like IBIT and Fidelity’s Wise Origin Bitcoin Fund (FBTC), have brought legitimacy and liquidity to the market. Over the past year, net inflows have consistently climbed, with IBIT alone attracting over $50 billion. Fidelity’s FBTC followed with $412 million during the same period. Such figures highlight Wall Street’s growing acceptance of crypto as a mainstream investment.
This is “mind-blowing” news for Balchunas, as these ETFs are industry newcomers, making them “babies” compared to figures like Satoshi.
Steve Kurz, the global head of asset management at Galaxy Digital, explained that the swift accumulation of Bitcoin by the funds highlights Wall Street’s increasing acceptance of cryptocurrency as a mainstream investment option. He noted that traditional financial institutions are progressively making digital assets more accessible through regulated products.
“For most people… the ETF is a pretty good option,” Kurz said in a webinar Dec 9. “It’s efficient. It sits in your portfolio. You can post it as collateral. It’s got a lot of benefits.”
ETFs: A Catalyst for Change
Spot Bitcoin ETFs have redefined how institutional investors approach crypto. By bridging the gap between cryptocurrency and TradFi, these products have catalyzed increased adoption and liquidity.
Key Impacts of Bitcoin ETFs:
- Increased Adoption: Pension funds and family offices have begun incorporating Bitcoin into their portfolios.
- Enhanced Liquidity: ETFs reduce price volatility, making Bitcoin more attractive to conservative investors.
- Global Expansion: Countries like Canada, Germany, and Switzerland have expanded Bitcoin ETF offerings, driving international interest.
In December alone, Bitcoin ETFs surpassed the 1.1 million BTC threshold, with weekly inflows reaching 7,800 BTC.
“This is mind-blowing,” Balchunas said, comparing ETFs to “industry newcomers” that have quickly gained influence.
TradFi’s Transformative Effects on Crypto
As TradFi deepens its involvement in the crypto sphere, the ripple effects are reshaping the market in multiple ways.
Increased Market Liquidity
The surge of institutional capital has made markets more stable by increasing liquidity and lowering price fluctuations. For a short while in 2021, Tesla used Bitcoin as payment and invested $1.5 billion in the cryptocurrency. As a result, Bitcoin became more valuable as an asset for businesses. This action also increased market liquidity and prompted other businesses to do the same.
Enhanced Credibility
When established institutions began working with cryptocurrency, it quickly gained popularity and attracted careful investors. For example, Fidelity launched Fidelity Digital Assets in 2018 to provide institutional clients with custody and trade execution services. This move not only reduced skepticism but also inspired other TradFi giants to enter the space.
Driving Product Innovation
Emerging market funds (ETFs) and other regulated financial products are the result of innovation driven by institutional demand. The ProShares Bitcoin ETF provided U.S. buyers a safe way to invest in Bitcoin, paved the way for more product development.
Influence on Regulation
TradFi’s involvement has accelerated the development of crypto regulations, balancing innovation with investor protection. Grayscale worked closely with regulators to ensure compliance, setting a precedent for transparency in crypto fund management.
Corporate Adoption for Profit and Hedging
Businesses are leveraging cryptocurrencies not only as hedging tools but also as sources of profit. Chinese tech company Meitu sold its Bitcoin and Ether holdings in December 2024, realizing an $80 million profit. This demonstrates how corporations can integrate crypto into their financial strategies effectively.
The Future of Crypto Companies
The rise of TradFi is likely to redefine success in the crypto industry. Firms with transparent operations and solid governance structures may outshine profit-focused but poorly managed entities.
Miller predicts that TradFi’s growing influence will divide the crypto ecosystem into two distinct camps:
- Purists: Focused on privacy and decentralization.
- Wall Street-Integrated Platforms: Packaged as traditional financial products.
“You might see two types of crypto communities emerge,” Miller said, highlighting the potential for a clean break between these groups.
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About The Author
Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
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Victoria is a writer on a variety of technology topics including Web3.0, AI and cryptocurrencies. Her extensive experience allows her to write insightful articles for the wider audience.
