Podcast Summary: Bankless – "What's Next for Crypto ETFs? ETFs vs DATs, Crypto ETF Explosion & Institutional Inflows"

Guest: James Seyffart
Date: September 25, 2025

Episode Overview

This episode serves as an expert-level exploration of the rapidly evolving landscape for crypto-based financial products, focusing primarily on the explosion of crypto ETFs (Exchange-Traded Funds), their comparison to DATs (Digital Asset Trusts), the impact on institutional and retail adoption, and what upcoming regulatory changes may mean for the industry. With ETF analyst James Seyffart as the featured guest, the discussion dives into flows, structure, narratives, and market mechanics, providing a comprehensive guide for anyone wanting to understand the intersection of TradFi and crypto in late 2025.

Key Topics & Insights

1. The ETF Explosion—What's Coming?

Timestamps: 00:00, 78:42, 79:21

• Projected Proliferation:

  "We're looking at literally over 100 ETFs in the crypto world coming to market in the next six to 12 to 18 months."
  — James Seyffart, [00:00], [79:28]

• SEC recently approved "generic listing standards" for ETFs, streamlining the process and making it easier for new crypto ETFs to launch.

  • Impact: These standards mean ETFs can be fast-tracked if the underlying crypto has a CFTC-regulated futures contract with six months of open interest and volume history.

    "The main thing that matters is the generic listing standards, I would say..." — James Seyffart [78:42]

• Upcoming Approvals: Basket products (top 10, 20 assets), new single-asset altcoin ETFs (Litecoin, Solana, XRP, Polkadot, Hedera, Dogecoin, Cardano, Avalanche, etc.), and innovative strategies (covered calls, basis trades) are all in the pipeline.

2. ETFs vs DATs: Competition or Complement?

Timestamps: 01:17–09:15

• Are ETFs and DATs in competition?

  "I don't think so... I just view it as another way to access it. It's almost like...banks; I do think some of the M NAVs on the DATs have gotten out of control."
  — James Seyffart [01:35]

• Pros & Cons:

  • ETFs offer pure, capital-efficient exposure with rigorous regulation ("the pure beta exposure").
  • DATs (Digital Asset Trusts) resemble corporate wrappers — sometimes overvalued, sometimes with opaque risks (ex: baggage from prior legal liabilities), but can offer higher yields, especially when staking is involved.

    "If you just want exposure to the asset, the ETF is going to give you beta... ETFs are set out to be the safest way to get exposure to an asset.” — James [03:32]

  • The DAT phenomenon is recent and "frothy", reminiscent of past crypto bubbles like NFTs or ICOs.

• DATs as Financial Primitives?
  Seyffart remains balanced, seeing elements of both genuine financial innovation and "animal spirits".

  "If you're buying these things at like 4x NAV...maybe that's a problem...But there's a good argument to be made they could trade at a slight premium if they generate yield..." — James [07:11]

3. ETF Performance & Institutional Adoption

Timestamps: 11:52–24:14

Bitcoin ETF — One Year In:

• "The biggest launch of all time": Over $55 billion in assets since January 2024, even accounting for outflows from GBTC.
• "The amount of money that's come in here is unlike anything we've ever seen.” — James [12:23]

Ethereum ETF — A Slower Start, Then Surge:

• Initial Outflows:

  • ETH ETFs "net negative" at launch due to outflows from Grayscale’s ETHE, before surging mid-2025.
  • Since the end of Q2, ETH ETFs have seen "$9 billion" in inflows, outpacing Bitcoin in that period.

    "Since the end of the second quarter... it's not even close. Ethereum has been on fire." — James [51:06]

• Narrative Effects:

  • The rapidly growing interest in ETH ETFs is attributed to new narratives (tokenization, staking, institutional acceptance) and trading strategies (basis trades).
  • "Tom Lee effect": Thought leadership driving the institutional and retail mindset shift around ETH.

    "Narrative makes a massive difference with respect to these asset prices and how they do in the ETF world." — James [55:18]

Holder Composition:

• Breakdown:
  • Investment Advisors: ~$17 billion [17:11]
  • Hedge Funds: ~$9 billion (mainly for basis trades) [20:59]
  • Brokerages, banks, and a handful of sovereign wealth funds (e.g., UAE/Abu Dhabi) [21:56]
• Institutional involvement is growing, especially as ETF liquidity, derivatives, and trading options expand.

4. Who Hasn’t Entered Yet? (And Who Won’t?)

Timestamps: 23:20–25:58

• "Big money" (sovereign wealth, pensions, massive endowments) has only begun to arrive.

  • Many still prefer direct institutional arrangements over ETFs, often for opaqueness or regulatory reasons.

• Long Onboarding Runway:

  • Major wirehouses (Merrill, BofA, etc.) are just beginning to allow advisors to recommend crypto ETFs.
  • Platforms like Vanguard still completely block crypto ETFs—

    "Vanguard is a whole different animal...they don't allow any sort of buying or trading exposure to crypto ETFs on their platform." [34:20]

5. Basket ETFs & Altcoin Expansion

Timestamps: 25:58–32:44

• Single-Asset vs Basket Exposure:
  • Most products today (and filings) have focused on "pure" exposure (BTC-only, ETH-only, etc.).
  • Advisors and less crypto-literate investors will increasingly want baskets, similar to the S&P 500—in Europe these already exist.
• US regulatory progress: Approval of basket funds (like Bitwise 10, Grayscale’s GDLC) has been temporarily delayed due to unclear criteria at the SEC, not outright rejection.
  • Coming soon: With generic listing standards, "expect massive expansion in basket products."

6. Ethereum Staking in ETFs – What’s Next?

Timestamps: 38:23–43:07

• Staking On the Horizon:
  • CBOE/Nasdaq have filings for staking-enabled ETH ETFs; final decision expected by October 23rd.

    "Approval, I think it's almost certainly going to happen in the next month or two." — James [41:17]

  • Uncertainty about immediate impact, particularly for ETH; yields are more impactful for SOL (Solana).

7. Regulatory & Product Mechanics: Solana, Doge, and More

Timestamps: 43:07–46:14, 79:16–81:57

• Solana ETF (Rex Osprey) launched early via regulatory workarounds, quickly capturing $300M+ AUM.

  "There are all these clever regulatory legal workarounds to try and launch this thing. So they launched it as a C corp initially..." — James [43:21]

• Expect rapid product proliferation:
  • DOGE, XRP, Litecoin, and more to follow, with both 40-Act and 33-Act ETF structures.
  • Warnings about market quality control:

    "We're gonna be wrapping up some shitcoins, man. If this is just a generic wrapper..." — David [81:57]

8. ETF Market Impact: Narrative, Basis Trades, and Institutional Flows

Timestamps: 55:18–60:45

• Market prices in 2024–25 are driven much less by retail than before; ETFs have introduced more institutional dynamics and narrative momentum.
• Basis yield strategies are a driving factor in institutional (especially hedge fund) adoption.

9. TradFi & DeFi – Tokenization and the Future

Timestamps: 71:41–78:16

• Major ETF issuers (BlackRock, Franklin Templeton, WisdomTree) are trialing tokenization, both for backend settlement and, ultimately, public-chain exposure.

  "It could theoretically happen on a public blockchain...these companies, they're not stupid. They see the tech, they see a lot of use case for it." — James [75:55]

• The future likely involves "beta" crossovers—some public-chain, some private/permissioned.

10. S&P 500 & MicroStrategy – Gatekeeping in Indices

Timestamps: 64:05–71:41

• Robinhood recently added; MicroStrategy has not, despite meeting all criteria.

  "MicroStrategy should be the other name that gets into the S&P 500 index." — James [65:47]

• The index committee is conservative, protective of stability/diversification, and may be wary of Bitcoin proxy bets.

Notable Quotes & Memorable Moments

• On ETF Dominance:

  "If you just want exposure to the asset, the ETF is the pure beta exposure that you’re going to get."
  — James Seyffart [05:17]

• On TradFi/DeFi Narrative Change:

  "Narratives make a massive difference with respect to these asset prices and how they do in the ETF world."
  — James Seyffart [55:18]

• On Product Proliferation:

  "It's a bazooka, we call it a spaghetti cannon. There's going to be just shit thrown at the wall or at the fan, if you will, and whatever sticks, investors buy."
  — James Seyffart [83:22]

• On Institutional Inertia:

  “Some of the biggest platforms are still just not okay with allowing these [crypto ETFs] just yet… maybe second or third inning [in broad adoption].”
  — James Seyffart [33:43]

• On TradFi Learning from DeFi:

  "Well, that is TradFi becoming a lot more like crypto."
  — David [83:28]

Timeline: Important Segments

| Topic | Speaker | Timestamp | |--------------------------------------|-----------------|------------| | ETF Proliferation & SEC Approval | James | 00:00, 78:42, 79:21 | | ETFs vs. DATs | James | 01:17–09:15| | ETF Success (BTC & ETH) | James | 11:52–14:20| | Institutional Breakdown (Holders) | James | 15:07–24:14| | Wirehouse/Advisor Adoption | James | 33:43–37:20| | ETF Product Types/Basket ETFs | James | 25:58–32:44| | Staking Approval Timeline | James | 38:23–43:07| | New Altcoin ETFs | James | 43:07–46:14| | ETF Impact/Basis Trade Dynamics | James | 55:18–60:45| | Index Construction Politics (S&P500) | James | 64:05–71:41| | Tokenization/TradFi vs. DeFi Merge | James | 71:41–78:16|

Final Takeaways

• Crypto ETF market is entering a phase of exponential expansion—hundreds of new products, with flexible approval processes and broadening institutional adoption.
• Regulatory and industry infrastructure improvements (like staking, tokenization, basket funds) will further accelerate inflows and bridge TradFi with crypto.
• Institutional “big money” is only just starting to deploy serious capital—long runway ahead for true mainstreaming.
• Market impact is increasingly about liquidity, structure, and narrative, not just retail speculation.
• Expect a "spaghetti cannon" of products, both high quality and dubious, as ETF frameworks open up.

This episode is a must-listen for those wanting actionable insight into how crypto is merging with mainstream finance—and what will shape the next cycle of innovation and capital flows.