The U.S. Securities and Exchange Commission has made crypto history by approving the first spot Bitcoin and Ethereum combination exchange-traded funds, marking a significant milestone in the mainstream adoption of digital assets. The approvals, granted to Hashdex and Franklin Templeton, pave the way for diversified cryptocurrency exposure through regulated investment vehicles.
The Hashdex Nasdaq Crypto Index U.S. ETF will trade under the ticker NCIQ, while Franklin Templeton’s fund will use the ticker EZPZ. Both funds are expected to launch in January 2025, offering investors exposure to both Bitcoin and Ethereum based on market capitalization weights of approximately 80% Bitcoin and 20% Ether.
A New Era of Crypto Investment Products
This landmark approval represents a significant evolution in the SEC’s approach to cryptocurrency investment products. Unlike the single-asset Bitcoin and Ethereum ETFs approved earlier in 2024, these combination funds offer built-in diversification, potentially appealing to investors seeking exposure to multiple digital assets through a single investment vehicle.
The SEC’s decision was based on the funds’ substantial similarities to previously approved spot Bitcoin and Ether ETFs, following initial delays and thorough regulatory review. Both Hashdex and Franklin Templeton filed their registration statements earlier this year, with Hashdex submitting in July and Franklin Templeton following in August.
Eric Balchunas, a senior ETF analyst at Bloomberg Intelligence, noted that the inherent diversification offered by these combo ETFs could attract significant investor interest. The approval reflects growing regulatory comfort with cryptocurrency investment products and acknowledges institutional demand for more sophisticated digital asset exposure options.
Fund Structure and Custody Arrangements
Both ETFs will utilize BitGo and Coinbase as core custodians, leveraging the established infrastructure that has supported other successful crypto ETF launches. The 80/20 Bitcoin-to-Ethereum allocation is based on market capitalization ratios, providing investors with exposure that reflects the current dominance of these two cryptocurrencies in the digital asset market.
The funds will track spot prices of both assets, holding actual Bitcoin and Ethereum rather than futures contracts or derivatives. This direct exposure approach has been a key factor in the SEC’s approval process, ensuring that investors receive genuine exposure to the underlying assets rather than synthetic replicates.
The launch of these combination ETFs represents a sophisticated approach to crypto investment, recognizing that many investors prefer diversified exposure rather than concentrated bets on individual cryptocurrencies. This approach aligns with traditional investment principles while embracing the unique characteristics of digital assets.
Market Context and Timing
The approval comes at a pivotal time for the cryptocurrency market, which has seen substantial institutional adoption throughout 2024. The U.S. crypto ETF market has attracted over $36 billion in net inflows since the approval of 11 spot Bitcoin ETFs in January, demonstrating strong institutional and retail appetite for regulated digital asset exposure.
In contrast, the market for spot Ethereum ETFs has been more modest, generating approximately $2.4 billion in net inflows since their debut in July. This disparity suggests that investors may be seeking more comprehensive crypto exposure strategies, which the new combination ETFs are designed to address.
The timing of the approval is particularly noteworthy, coming as the market approaches the end of a year that has seen significant regulatory clarity and institutional acceptance of cryptocurrencies. The SEC’s willingness to approve more complex crypto products signals growing confidence in the market’s maturity and infrastructure.
Implications for the Crypto Industry
This approval has far-reaching implications for the broader cryptocurrency ecosystem:
Institutional Adoption: The launch of combination ETFs could attract more conservative institutional investors who have been hesitant to expose their portfolios to single-asset cryptocurrency funds.
Market Sophistication: The approval demonstrates that regulators are comfortable with increasingly sophisticated crypto investment products, potentially paving the way for more innovative offerings in the future.
Portfolio Management: Financial advisors and portfolio managers may find it easier to incorporate crypto exposure into traditional investment strategies through diversified ETF products.
Liquidity and Depth: The addition of new ETF products should increase overall market liquidity and depth, benefiting all market participants.
Competitive Landscape
The approval puts Hashdex and Franklin Templeton at the forefront of crypto product innovation. Hashdex, which already operates cryptocurrency funds in international markets, brings significant experience to the U.S. market through this approval. Franklin Templeton, one of the world’s largest asset managers, adds institutional credibility and distribution power to the crypto ETF space.
Both companies will compete with existing single-asset ETF providers while offering a differentiated value proposition through diversification. The success of these products could encourage other asset managers to develop similar combination products, potentially including other cryptocurrencies beyond Bitcoin and Ethereum.
Regulatory Significance
The SEC’s decision to approve these combination ETFs signals a notable evolution in regulatory thinking about cryptocurrency investment products. By approving funds that hold multiple digital assets, the Commission has demonstrated confidence in the market’s ability to support more complex structures.
This approval also suggests that the SEC may be increasingly comfortable with cryptocurrency as an asset class, moving beyond the cautious approach that characterized earlier years of crypto regulation. The decision could pave the way for additional crypto product approvals in 2025 and beyond.
Looking Ahead
As these ETFs prepare for launch in January 2025, market participants will be watching closely to gauge investor appetite for diversified crypto exposure. Initial flows and performance could influence the development of similar products from other asset managers.
The success of Bitcoin-Ethereum combination ETFs could also encourage the development of products that include other major cryptocurrencies, potentially leading to more comprehensive digital asset index funds. However, such developments will likely depend on continued regulatory comfort and market demand.
This coverage reflects the SEC’s approval announcement as of December 22, 2024. Market conditions and fund performance data after this date are not included in this analysis.
