100 new ETFs coming, crypto custodians become the target — hidden systemic risks are brewing

The cryptocurrency market in 2026 will usher in an unprecedented wave of innovation. The general listing standards approved by the SEC on September 17th have shortened the ETF approval cycle to 75 days, and Bitwise predicts that over 100 crypto-related products will flood the market next year. While this appears to be a victory for market democratization and product diversification, beneath the surface of prosperity lies a concerning structural flaw.

Custody Concentration Out of Control — 85% of Global Assets Suspended on One Line

Behind this explosive growth of ETFs lies a fatal single point of failure. A major custodian currently controls approximately 85% of the assets in the global Bitcoin ETF market, a figure that alone warrants caution. When over 100 new products launch simultaneously, custody risk will become a prime target.

Based on the trend of newly listed Bitcoin ETFs in 2024, fees have already been driven down from early levels of 50 basis points to 20-25 basis points. This fee competition will further push smaller custodians out of the market, leading to increased industry concentration. Although traditional financial institutions like US Bancorp, Citi, and State Street are re-entering the crypto custody space, their current market share remains extremely limited and insufficient to diversify risk.

Liquidity-Weak Altcoins Face Complete Collapse Risk

Compared to Bitcoin and Ethereum, which enjoy abundant liquidity, most altcoins will become high-risk assets in the new ETF era. When authorized participants (APs) need to find sufficient liquidity for these coins, the market will immediately expose its fragility.

Especially during periods of volatility, lending markets can dry up instantly. If APs cannot find enough hedging tools, they will cease creating new shares, causing ETFs to trade at a premium. In more extreme cases, liquidity crises could even lead to some funds suspending trading. This scenario has occurred in early crypto index ETFs—many investors fled due to concerns over net redemptions, leading to persistent discounts in fund trading.

The Hidden Power of Index Providers

A small number of index providers such as CF Benchmarks, CoinDesk, and Bloomberg Galaxy effectively control pricing. The general standard requires all ETFs to reference benchmark indices that meet regulatory standards, giving these index providers enormous influence.

Many wealth management platforms prefer to choose familiar indices, making it difficult for new entrants—even those with superior methodologies—to break through this barrier. For coins with weak custody and insufficient index liquidity, any algorithmic adjustments by index providers could trigger market volatility.

The Market Will Fall into “Harsh Elimination”

Senior ETF analyst at Bloomberg warns that the market will witness “mass liquidations.” History shows that after the launch of the general standards for stock and bond ETFs in 2019, the number of new products surged from 117 to 370, followed by a wave of fund closures—dozens of small funds disappeared within two years.

Crypto ETFs will repeat this pattern, but with an even worse starting point. Funds with assets below $50 million can hardly cover operational costs, and the first wave of liquidations is expected by late 2026 or early 2027. The first to go will be high-fee, single-asset duplicate funds, niche index products, and thematic ETPs whose underlying markets change faster than the products can adapt.

Who Will Be the Winners and Who Will Be the Sacrifices

Bitcoin, Ethereum, and Solana will stand out in this competition. Each new ETF package will strengthen their institutional positions, attract more lending sources, and give traditional financial institutions more reasons to increase custody business. A major custodian’s assets under custody reached $300 billion in Q3 2025, creating network effects but also vulnerabilities.

Meanwhile, long-tail assets will face a paradoxical situation: more ETFs mean more legitimacy, but also more fragmentation, with each fund having thinner liquidity and higher risk of closure. Issuers bet that a few products will survive and subsidize others, while authorized participants bet they can profit from spreads and lending costs in the redemption wave of weak coins.

The Concentration Trap Has Not Been Broken

The general standards channel funds into the most liquid and institutionalized corners of crypto, but do not address the fundamental issue of centralization. Custodians believe that concentration is more profitable than competition—until regulators or clients force diversification.

Regulators will only discover these structural vulnerabilities during crises. SEC Commissioner Caroline Crenshaw has warned that the general standards could lead to a flood of products entering the market without individual review. The question boils down to this: will this ETF boom make the institutional infrastructure of crypto more centralized, or will it achieve risk dispersion?

Current trends suggest the former.