Bitcoin’s performance is starting to be overshadowed by the Ether and Solana tokens, as hype around US cryptocurrency exchange-traded funds (ETFs) shifts to the two smaller digital assets.

Solana surged the most in over a month on Thursday, after fund manager VanEck filed an application to start an ETF for the token. Ether has pulled ahead of Bitcoin this year, as final approvals for funds focused on the coin come closer.

In contrast, Bitcoin hogged the limelight at the start of 2024 when the first US spot ETFs for the largest digital asset went live. The products from the likes of BlackRock Inc and Fidelity Investments drew large inflows, taking Bitcoin to a record of US$73,798 in March, but demand and the price have since cooled.

The US Securities and Exchange Commission (SEC) last month signed off on stock exchange proposals to list spot-Ether ETFs. Some reports have said final approvals for launches may come as soon as next week. 

Analysts have begun pushing back on subdued expectations about demand for ETFs holding No. 2 token Ether, which is less well-known than Bitcoin. The US vehicles may attract US$5 billion in net inflows in the first five months, according to Galaxy Digital Holdings LP and Fundstrat Global Advisors LLC.

“Sentiment around the Ether ETF launch is far too bearish,” Fundstrat’s head of digital asset strategy Sean Farrell wrote in a note. He predicts that the ETFs will get a boost from hedge funds pursuing the so-called basis trade, which seeks to exploit discrepancies between the spot and futures market.

Ether is up 51% since the turn of the year, exceeding Bitcoin’s 45% advance. Solana - also known as SOL - had already surged 754% over 12 months before Thursday’s gains, and ranks as the No. 5 digital asset.

US Bitcoin ETFs have wooed US$14.5 billion of net inflows since listing in January. JPMorgan Chase & Co strategists estimated that the prospective Ether portfolios will attract a “modest” US$1 billion to US$3 billion of net inflows over the rest of 2024.

The SEC surprisingly pivoted towards approval of spot-Ether ETFs, after grudgingly allowing Bitcoin funds in the wake of a court reversal in 2023. 

While Bitcoin is viewed as a commodity, the agency under chair Gary Gensler argues that most other tokens are unregistered securities that should be subject to its oversight. Gensler has been ambiguous on whether Ether is a security.

But Solana is one of more than a dozen coins that the SEC singled out in various lawsuits as unregistered securities. That raises doubts about whether the regulator would allow Solana ETFs. A filing like VanEck’s doesn’t mean that the SEC will give the product approval to launch.

Bitcoin rose roughly 0.5% to trade around US$61,700 as of 12:10 p.m. on Friday in Singapore. Ether edged up to US$3,453 and Solana dipped 1.5% to US$147.

  - Bloomberg