Fear grips Wall Street as investors rapidly dump risky crypto exchange-traded funds (ETFs) amid a drastic downturn in the cryptocurrency market. This sell-off, triggered by liquidity issues affecting altcoins, has forced fund managers to reduce their exposure to volatile corners of the crypto space. U.S. spot Bitcoin ETFs saw over $530 million in outflows in just 24 hours, led by ARK Invest’s ARKB with $275 million in redemptions and Fidelity’s FBTC with $132 million. This decline follows Bitcoin’s plunge below $105,000 and a widespread drop of up to 70% for other volatile altcoins over the past week. Experts suggest this sell-off highlights structural weaknesses within crypto ETFs tied to illiquid assets. While Bitcoin has shown resilience amidst this turmoil, it’s worth noting that ElonTrades on X observed a parallel trend during the peak of the gold market in August 2020. The price of Bitcoin surged from $10,000 to $60,000 within months, mirroring the current crypto landscape. Meanwhile, even as Wall Street sheds its exposure to crypto-linked ETFs, innovative activity persists in the ETF space. Swiss asset manager 21Shares recently submitted an application to the U.S. Securities and Exchange Commission (SEC) for a 2x leveraged ETF tied to Hyperliquid’s HYPE token, a decentralized exchange governance asset gaining traction among DeFi traders. This move would represent the first U.S.-based leveraged DeFi ETF, exacerbating on-chain risks as regulators and investors grapple with crypto’s stability. The contrasting reactions of traditional investment firms versus 21Shares highlight the split within the ETF market, with some seeking to manage risk, while others actively pursue potentially higher-risk leverages.