Many assume the S&P 500 is a purely rules-based, passive index. In reality, a committee makes discretionary decisions on inclusions and exclusions. For example, MicroStrategy met the technical criteria for inclusion but was denied by the committee.
A stark contrast exists in the crypto market. Long-time participants see doom, while new institutional entrants from traditional finance see significant opportunity and are actively investing, even as prices fall and sentiment among crypto natives is poor.
The modern ETF landscape is characterized by issuers launching a high volume of specialized products, including leveraged single-stock and long-tail crypto ETFs. They accept that many will fail, hoping a few become highly profitable hits.
The profitable "basis trade" (selling futures, buying spot) persists due to strong demand for leverage in less-regulated offshore markets. TradFi hedge funds exploit this by providing capital via regulated futures, a dynamic that intensifies with market momentum.
In a race to capture investor appetite for AI, ETF issuers are filing paperwork for products based on companies that haven't even gone public. This includes covered call ETFs for SpaceX, OpenAI, and Anthropic, a strategy to be first-to-market for hyped IPOs.
The shift in investor preference from technology stocks to "hard asset" sectors is validated by ETF flow data. In Q1 2026, the top sectors for inflows were energy, materials, and industrials, indicating a tangible diversification away from big tech.
When national stock markets in Greece and Egypt closed during crises, their corresponding US-listed ETFs continued to trade. The price of these ETFs accurately predicted the level at which the underlying markets would reopen, proving their price discovery power.
The hype around immediate institutional crypto adoption is misplaced. Real integration by major players like Schwab is a multi-year process, slowed by regulation. Humans tend to overestimate near-term change and underestimate long-term transformation.
Institutions, led by hedge funds, were net sellers of Bitcoin ETFs in Q4. However, 13F reports can be misleading because they only disclose long positions, meaning large holdings by firms like Jane Street are likely part of a hedged, delta-neutral strategy, not a bullish bet.