Analyst: Oversupply of Crypto ETPs May Trigger Large-Scale Liquidations by End of 2027
Bloomberg Intelligence analyst James Seyffart and industry observers warn that an oversupply of crypto exchange-traded products (ETPs) could lead to widespread liquidations by late 2026–2027. At least 126 U.S. listing filings for crypto ETPs are pending, and more than 100 products could be approved in 2026 following the SEC’s new generic listing standards that speed commodity-trust listings. Many issuers are launching multiple ETPs that may fail to attract sustainable assets under management (AUM); several crypto ETPs (for example, ARKY and ARKC) have already been liquidated this year. Historical ETF data cited show heavy fund launches and closures: roughly 746 ETFs debuted in 2024, about 800 new funds in the first nine months of 2025, 266 fund closures in H1 2025, and ETFGI’s 622 closures in 2024. The SEC’s late-September guidance removes the need for individual 19(b) approvals for qualifying commodity trusts and permits accelerated or automatic effectiveness under Rule 461, lowering barriers and likely increasing competition and issuance. For traders, the main implications are: elevated product supply and competition for flows; likely concentration of capital into larger, established funds as weak ETPs are closed; potential liquidity shifts and selling pressure around liquidations; and heightened short-term volatility in underlying crypto assets and ETP prices. Traders should monitor new filings, approvals, fund launches, AUM levels, and announced liquidations, as these events can prompt rapid reallocations and transient price moves in major crypto markets.
Bearish
Net effect is likely bearish for the underlying cryptocurrencies mentioned. An influx of new crypto ETP listings increases product supply and competition for the same investor capital; many smaller or niche ETPs are unlikely to reach sustainable AUM and will be liquidated. Liquidations and forced redemptions typically produce selling pressure on underlying assets, and concentrated flows into a handful of large funds can widen bid-ask spreads and reduce liquidity for smaller venues. In the short term, announcements of fund closures, accelerated approvals, or large reallocations can trigger spikes in volatility and downward price pressure as assets are sold to meet redemptions. Over the medium term, surviving large ETPs may stabilize flows, but elevated issuance followed by culling suggests prolonged period of reallocation risk and episodic selling, which is generally negative for price discovery and upward momentum for the referenced crypto markets.