Beyond Bitcoin: Riding the AltAlt Wave

As investor interest in cryptocurrency products grows, crypto fund providers are developing increasingly innovative strategies to meet this demand.

However, the concept of an “AltAlt Season” exchange-traded fund represents a completely novel approach.

Tidal Financial Group’s “Quantify 2X Daily AltAlt Season Crypto ETF,” included in a recent filing with the Securities and Exchange Commission (SEC), has raised eyebrows among industry professionals.

James Seyffart, a Bloomberg ETF Research Analyst, questioned the distinction, tweeting, “What is AltAlt vs Alt? (Because I wanted to know too). Alt just excludes BTC, the other excludes both BTC and ETH.” He included a screenshot of the filing to illustrate the point.

Tidal’s regulatory filing also encompasses the “Quantify 2X Daily All Cap Crypto ETF” and the “Quantify 2X Daily Alt Season Crypto ETF.” These leveraged funds are designed for investors with a high tolerance for risk, offering the possibility of doubling the daily returns of their cryptocurrency holdings.

According to the prospectus, “Because the fund seeks daily leveraged investment results, it is very different from most other exchange-traded funds. It is also riskier than alternatives that do not use leverage.” This disclaimer appears in each fund’s description.

The “AltAlt” fund’s performance will be initially correlated with XRP and Solana, as detailed in Tidal’s prospectus. The “Alt” ETF will track those cryptocurrencies plus Ethereum, while the “All Cap” strategy covers all of those coins including Bitcoin.

“Alt seasons” generally refer to periods when alternative cryptocurrencies (altcoins), especially Ethereum, outperform Bitcoin in terms of price appreciation. This typically occurs after Bitcoin experiences its own price surge. “Alt alt seasons” denote a further shift, where market momentum flows to altcoins with smaller market capitalizations, creating a trickle-down effect. The “AltAlt” ETF aims to capitalize on these latter trends.

All three funds have the potential to utilize swap agreements or options contracts tied to shares of U.S.-listed spot crypto ETFs, or gain exposure to digital assets indirectly through derivatives or direct investments in crypto funds, among other investment options.

In recent times, applications for leveraged crypto ETFs, along with spot funds based on various altcoins and combinations of digital tokens, have become more and more common. Bloomberg research indicates that the SEC is currently reviewing submissions for over 90 such products, as of late August.

The prospects for approval were bolstered on Wednesday when the SEC approved updated generic listing standards for trusts centered on commodities, smoothing out the approval process. This action reflects a more favorable regulatory and political atmosphere that is encouraging fund issuers.

Bloomberg Senior ETF Analyst Eric Balchunas joked in an X post on Thursday: “We’re already at 2x AltAlt Season Crypto ETFs and it’s not even October. Do you realize how crazy things are gonna get?”

He further commented: “I’ll be honest, I wasn’t that moved by the 2x Alt Season ETF but the 2x AltAlt Season, well that’s a whole [different] story lol”