After a surge and then a crash in the cryptocurrency market, about 130 "altcoin-related ETFs" are lining up for approval, waiting to be listed on the US stock market.

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As cryptocurrency prices soared, Wall Street moved quickly, with issuers scrambling to submit a huge number of altcoin ETF applications, attempting to package these highly volatile, thinly-traded speculative tokens into regulated financial products. However, the recent plunge has wiped out billions of dollars in market value from the crypto sector, exposing the fragility of this strategy.

On October 18, reports indicated that as the speculative frenzy drove up altcoin prices, Wall Street made a rapid entrance. According to Bloomberg data, there are currently around 130 ETF applications linked to small cryptocurrencies awaiting approval from the U.S. Securities and Exchange Commission (SEC), covering tokens such as Polkadot, Chainlink, and meme coins like Pengu connected to Pudgy Penguins.

However, the recent sharp sell-off in the crypto market has poured cold water on previous exuberance. The recent crypto crash is far less chaotic than the 2022 digital asset crisis, but it remains a warning. Fresh concerns over credit market stress caused crypto prices to drop again on Friday (October 17), with the altcoin index falling by as much as 11%, its lowest level since April.

Some tokens fell 70% in the past week, with liquidity drying up and buy orders disappearing. All this serves as a stark reminder to investors of how quickly the entire speculative token ecosystem can evaporate. Analysts noted this sudden market turmoil also puts issuers seeking to repackage altcoins as compliant financial products into an awkward position. These ETF applications submitted during peak market sentiment now face harsh scrutiny regarding their underlying asset stability and liquidity.

Loose Regulation Triggers Application Rush

Many ETF applications were submitted months ago when market sentiment was optimistic, as issuers bet that retail risk appetite would continue.

Encouraged by the Trump administration’s lax regulatory environment, issuers became more daring, inspired by the White House’s tolerant stance on digital assets. Some applications even included double-leverage instruments tied to cryptocurrencies associated with Trump and Melania.

Jane Edmondson, Head of Index Product Strategy at TMX VettaFi, said: “While it's difficult to predict which altcoins will win, issuers are taking advantage of a more crypto-friendly regulatory environment to get ahead.”

However, she is cautious about whether this wave of applications matches actual investor interest: “That remains to be seen.”

Yet, regulators’ clear stance may take time. As the government shuts down, the SEC has been closed for over a week, possibly halting the approval process for pending applications.

Structural Fragility of Underlying Assets

Though the ETF wrapper appears attractive, the underlying assets remain highly speculative, structurally relying on rapid flows of funds, retail rotation, and viral momentum. Whether these forces can be replicated in fund form remains untested.

Ilan Solot, Senior Global Market Strategist at Marex Solutions, saw major obstacles to packaging altcoins as ETFs even before the crash—from thin liquidity, token dilution, to small market caps.

“We see this new application frenzy; many vendors think it's party time. But after the crash, it will get much harder. Thousands of ETFs have launched and failed to survive. I doubt more than a handful of these products will see meaningful inflows.”

The timing of this crash also heightened concerns about the disconnect between regulatory approval and investor protection. As the SEC weighs whether to approve more altcoin ETFs, the backdrop is massive losses faced by retail traders—many of whom were attracted by the speculative frenzy, only to see their holdings shrink.

Critics believe that the current laissez-faire stance risks giving higher-risk tokens an institutional badge of legitimacy, even as their structural vulnerabilities have just been exposed in recent weeks.

Market Will Decide Product Value

Of course, packaging altcoins into regulated ETF frameworks could also provide retail traders seeking exposure to meme coins and other high-risk assets with a safer path.

Unlike offshore exchanges or leveraged derivatives, ETFs can offer clearer disclosures, custodial protection, and standardized risk descriptions, potentially bringing greater transparency to a corner of the crypto market long noted for its opacity.

Bloomberg Industry Research ETF analyst James Seyffart described this phenomenon as the ETF sector's “spaghetti cannon” strategy—“They’ll fire a ton of these products and see which ones stick to the wall.” He added:

“It’s likely that many products will ultimately ‘hit the fan,’ but in the end, the market and investors will decide which products create value.”

Risk Warning and DisclaimerThe market contains risks; investments should be made cautiously. This article does not constitute personal investment advice and does not account for individual users’ particular investment objectives, financial status, or needs. Users should consider whether any opinions, views, or conclusions herein are suitable for their specific circumstances. If you invest based on this information, you do so at your own risk. ```