On December 23, Bitcoin and Ethereum spot ETFs saw a sharp drop. Bitcoin spot ETFs lost $189 million, while Ethereum ETFs were down by $95.52 million. Despite this dip, investor attention quickly shifted to the upcoming holiday rally period from December 24 to January 5 — a stretch when the S&P 500 historically sees an average gain of 1.3% and positive returns nearly 78% of the time. On Tuesday, the S&P 500 closed higher at 6,909.79, continuing its strong year-end momentum.

In 2025, exchange-traded funds (ETFs) poured into U.S. markets like never before. With just days left in the year, the ETF industry — now worth around $13 trillion — broke records in fund inflows, new product launches, and trading activity. Total inflows reached $1.4 trillion, beating last year’s record. Over 1,000 new ETFs hit the market, and trading volumes reached their highest level for the year. The strong finish showed no signs of slowing down, as investors continued moving cash into ETFs daily. The key takeaway: both scale and speed defined this explosive growth in ETFs.

This surge in ETF activity was fueled by gains in U.S. stocks. The S&P 500 delivered its third straight year of double-digit growth, even though it moved sideways since October. Investors weren’t deterred by concerns over high AI spending or questions about when the Federal Reserve might cut interest rates. Despite market uncertainties, ETF trading stayed strong. According to Bloomberg data, the last time flows, launches, and volume all peaked together was in 2021. This year echoed that trend — issuers kept releasing new funds, and investors kept buying.

However, this rapid growth has raised some caution flags. After a booming year in 2021, markets faced a tough 2022: the S&P 500 dropped 19%, and government bonds didn’t offer much protection due to rapid interest rate hikes by the Fed. While ETF trading remained active during that downturn, both inflows and new launches slowed as volatility surged. Analysts warn that 2025 could bring a reality check after such a near-perfect run for ETFs this year. High expectations mean there’s now less room for mistakes.

Meanwhile, crypto-related ETFs revealed some cracks late in December. Bitcoin spot ETFs recorded four straight days of outflows, with $157 million pulled from BlackRock’s IBIT alone on December 23. Ethereum spot ETFs also struggled — losing $95.52 million with zero inflows across all nine products on the market. Even so, many investors stayed optimistic as they looked ahead to the traditional “Santa Claus Rally,” hoping for strong performance to close out the year and start the new one on a positive note.