The explosion of crypto ETFs in 2026: risk concentration and the battle for infrastructure control

The SEC has transformed the crypto ETF landscape with the approval of generic listing standards in September, reducing launch times to just 75 days. The result? Bitwise predicts a wave of over 100 new crypto ETFs in 2026. But behind this explosive growth lies a structural problem: the infrastructure it relies on could completely stall.

The Custody Bottleneck

Here’s the data that should make you think: Coinbase controls up to 85% of the global assets of Bitcoin ETFs. This is not a technical detail; it’s a systemic vulnerability.

While banks—U.S. Bancorp via NYDIG, Citi, State Street—are re-entering the institutional custody market, they are doing so on a much smaller scale. Concentration remains extreme. Authorized Participants (AP) and market makers depend heavily on a few venues for price discovery and lending. For altcoins, the problem worsens: many lack the depth in derivatives necessary to manage creation and redemption flows without market distortion.

When infrastructure is fragile, even a single operational issue in a dominant custodian could freeze a significant share of global assets.

The Battle Between Index Providers

A silent but decisive power remains in the hands of index providers. CF Benchmarks, MVIS, S&P, and Bloomberg Galaxy dominate surveillance and benchmarking for crypto ETFs, just as they do in traditional markets.

These providers set the inclusion rules, eligibility criteria, and weighting methodologies. For new entrants in the thematic ETF sector, this consolidation creates a barrier to entry: even with superior methodologies, it’s difficult to emerge when big names already control access to exchanges.

Technical Infrastructure Constraints

The SEC’s in-kind order of July 29 allowed trusts to settle creations with real coins instead of cash. For Bitcoin and Ethereum, this is a manageable improvement. For underlying assets with lower liquidity, however, lending could dry up completely during volatility, forcing suspensions of creations and leaving the ETF to trade at a premium until supply returns.

APs and market makers face concrete constraints:

• Short selling availability is limited for less liquid tokens
• Wider spreads become necessary to compensate for risk
• During turbulent phases, creations can halt entirely

Market Selection: Who Survives and Who Dies

Bloomberg estimates we will see many liquidations. ETF.com monitors dozens of closures each year: funds under $50 million struggle to cover costs and often shut down within two years.

The most vulnerable in 2026-2027 will be:

• Single-asset duplicate funds with high fees
• Thematic products on tokens with insufficient liquidity
• Thematic ETFs betting on still-unstable sectors

The fee war accelerates everything. The new Bitcoin ETFs of 2024 debuted at 20-25 basis points, halving the fees of early issuers. With shelf space crowded, issuers will cut even more on core products, leaving long-tail funds unable to compete.

The Fork: BTC/ETH/SOL vs. the Long Tail

For Bitcoin, Ethereum, and Solana, the wave of ETFs is a validation. More ETF wrappers will strengthen spot-derivative links, reduce spreads, and solidify their status as core institutional collateral. Bitwise predicts ETFs will absorb over 100% of the net new supply in these three assets.

For everything else, it’s a stress test.

Illiquid assets face different dynamics: when an ETF holds a token with limited lending, demand spikes push premiums until APs find enough coins. If lending disappears during volatility, premiums persist and APs stop creating.

What Rules Still Allow

Generic standards exclude actively managed, leveraged, or innovative-featured ETPs. These must follow the traditional 19b-4 process, which is slower and involves individual assessment.

SEC Commissioner Caroline Crenshaw warned: standards could flood the market with products that skip individual evaluation, creating related fragilities that regulators only discover during crises. The rules direct flow toward the most liquid and institutionalized corners of cryptocurrencies.

The Central Question

Does the ETF boom consolidate the institutional infrastructure of crypto around a few coins and dominant custodians, or does it expand access and distribute risk?

Assets under custody at Coinbase reached $300 billion in Q3 2025. This scale creates network effects but also systemic fragility.

Custodians believe that concentration pays more than competition—until regulators or clients impose diversification. APs bet they can extract spreads and lending fees before someone gets stuck with an illiquid token during a wave of redemptions.

Generic standards have made launching crypto ETFs easy. They have not made keeping them alive easy.