The highly anticipated initial public offering of Elon Musk's SpaceX is creating ripple effects far beyond the aerospace sector, potentially reshaping capital flows across ETFs as investors raise cash to participate in what could become the largest IPO in history.
SpaceX is expected to debut with a valuation of roughly $1.75 trillion and has reportedly reserved as much as 30% of shares, or $22.5 billion worth of stock, for retail investors.
That unusually large retail allocation has fueled expectations that investors may sell other speculative assets, including cryptocurrencies and related ETFs, to fund purchases of the stock.
Analysts and market participants told Reuters that cryptocurrencies have already felt the pressure.
Bitcoin recently traded near $60,000, down sharply from its October peak, while crypto ETF outflows have accelerated in recent months. The trend has raised questions about which ETF segments could lose assets and which could emerge as beneficiaries of the SpaceX frenzy.
Potential Losers: Crypto ETFs Face Another Headwind
Spot Bitcoin ETFs may be among the most vulnerable if retail investors continue rotating capital away from digital assets and toward high-profile AI and space-related opportunities.
The pressure could be felt most acutely by the largest funds in the category, including the iShares Bitcoin Trust (IBIT), Fidelity Wise Origin Bitcoin Fund (FBTC) and ARK 21Shares Bitcoin ETF (ARKB), which collectively helped bring billions of dollars into the asset class following the launch of spot Bitcoin ETFs in 2024.
According to Reuters, crypto ETF outflows exceeded $2 billion in May as enthusiasm for the asset class cooled. Market participants suggest some of that capital is finding its way into equities, particularly growth-oriented themes tied to artificial intelligence.
The pressure could extend beyond spot Bitcoin funds to ETFs holding crypto-linked equities such as Coinbase Global Inc (COIN), bitcoin miners and Strategy Inc (MSTR). Examples include the Bitwise Crypto Industry Innovators ETF (BITQ), which holds companies across the digital asset ecosystem, and the VanEck Digital Transformation ETF (DAPP), whose holdings include firms such as Coinbase, Strategy and Bitcoin miners. These products have benefited from crypto's rise over the past two years, but now face competition from what some investors view as a newer and more compelling growth narrative.
The timing is particularly challenging for crypto funds.
Expectations for additional blockbuster IPOs from OpenAI and Anthropic later this year could further intensify competition for retail investor dollars.
Potential Winners: SpaceX-Linked and Innovation ETFs
Funds with direct or indirect exposure to SpaceX could attract renewed investor attention as the IPO approaches.
The ERShares Private-Public Crossover ETF (XOVR), which holds pre-IPO growth companies, recently implemented a shareholder protection plan ahead of the listing, which can attract inflows. The Destiny Tech100 Fund (DXYZ), which offers investors exposure to a portfolio of private technology companies, could also see heightened interest from traders seeking access to private-market innovation themes.
The launch of multiple leveraged SpaceX ETFs scheduled on and around the IPO date may further amplify trading activity. Issuers, including Defiance, Tuttle Capital, ProShares and others, have raced to introduce products designed to capitalize on anticipated volatility surrounding the stock.
Beyond dedicated SpaceX vehicles, broader innovation and AI-focused ETFs could benefit if investors increasingly favor artificial intelligence-related growth stories over cryptocurrencies. Semiconductor funds, which have significantly outperformed crypto assets over the past year, may also continue to attract inflows if the AI investment cycle remains intact.
While analysts caution that it is difficult to prove money leaving crypto is flowing directly into SpaceX, the IPO appears to be accelerating a broader rotation within speculative growth assets.
