Original author: Gyro Finance
Reprinted by: Luke, Mars Finance
Bitcoin pulls back, while altcoin ETFs soar.
The bull market is still spreading. Although Bitcoin has risen and fallen, Ethereum has reversed its decline and broken through $3,600. Defi, Layer2 and other sectors have seen a general rise, and the altcoin market has finally begun to rejuvenate. But a few days ago, the situation was quite different. At that time, Bitcoin was close to $100,000, but altcoins were wailing everywhere, and the market was in a state of survival.
The altcoin market is bleak, but Wall Street has started to take notice. Under the unprecedented regulatory benefits, Wall Street has set its sights on altcoin ETFs, which has also given the long-dormant altcoin market a boost in winter.
Just a week ago, Bitcoin continued to break through and hit $99,000, making headlines in major media, but the community, which has always been active, was unusually silent. In this round of institutional-led bull market, most market participants did not get liquidity overflow, but instead the altcoins they held were constantly sucked by Bitcoin, showing a downward trend. Compared with the vigorous bull market propaganda, participants felt that they had something to complain about.
A typical example is Ethereum. Compared with other altcoins, ETH is already a recognized mainstream currency, but in terms of price trend, its relative growth is far less than that of Bitcoin. The exchange rate between ETH and BTC has continued to decline this year, from 0.053 to a minimum of 0.032, and has only recently begun to rebound. Even Ethereum is like this, and other currencies are even more so.
But recently, the dormant altcoin market seems to have come alive. SoL, XRP, LTC and Link were launched last weekend. Solana's DEX daily trading volume exceeded $6 billion, and XRP surged to $1.63. This morning, Ethereum rose strongly to over $3,600. The altcoin sector ushered in a general rise, and the Defi sector rose by 8.47% in 24 hours.
When it comes to the reasons for the rise of copycat stocks, in addition to the positive sentiment brought by the bull market, Wall Street has made an indelible contribution, and ETF is the most intuitive presentation.
Looking back to the beginning of this round of bull market, 11 Bitcoin spot ETFs set off a craze. The entry of Wall Street giants such as BlackRock and Fidelity promoted the mainstreaming of Bitcoin and rapidly lowered the threshold for market participation in the crypto market. At that time, Bitcoin and Ethereum spot ETFs were approved one after another, and the market had different opinions on the next token that could make Wall Street excited. Due to market value and capital considerations, Solana was once the most popular currency.
On June 27, asset management giant VanEck took the lead and submitted an S-1 form for "VanEck Solana Trust" to the SEC. The next day, 21Shares followed suit and submitted an S-1 application. On July 8, the Chicago Board Options Exchange Cboe officially submitted a 19b-4 document for VanEck and 21Shares' Solana ETF, bringing this wave of SOL ETF hype to a climax.
The good times didn’t last long, and the SEC’s tough stance quickly cooled down the altcoin ETF. In August, market news said that CBOE had removed the 19b-4 applications for two potential Solana ETFs from the “pending rule changes” page on its website, and analysts bluntly said that “there is no hope of passing.”
But now, the market is still there, but the situation is very different. On November 22, Cboe BZX Exchange documents showed that the exchange proposed to list and trade four Solana-related ETFs on its platform. The ETFs were initiated by Bitwise, VanEck, 21Shares, and Canary Funds, and were classified as "commodity-based trust fund shares" and submitted in accordance with Rule 14.11(e)(4). If the SEC formally accepts it, the final approval deadline is expected to be early August 2025.
Not only Solana, but more ETFs are on the way. In the past month, crypto investment company Canary Capital has submitted spot ETF applications for three currencies, including XRP, Litecoin, and HBAR, to the US SEC. According to Nate Geraci, president of ETF Store, at least one issuer is currently trying to apply for an ETF for ADA (Cardano) or AVAX (Avalanche).
The emergence of altcoin ETFs has sparked widespread heated discussion, and the inflow of funds from far away has made the market boil. Is the Wild West of crypto ETFs really coming?
From an objective perspective, looking back at the approval process of Bitcoin and Ethereum, cryptocurrencies need to meet two implicit requirements to be approved as spot ETFs. One is that they have not been explicitly identified as securities by the China Securities Regulatory Commission; the other is that there must be leading indicators to prove market stability and non-manipulability. The typical feature is that the token can be traded on the Chicago Mercantile Exchange (CME) in the United States, that is, the futures market is first launched. From this point of view, apart from Bitcoin and Ethereum, there seems to be no one in the current crypto market that meets the standards. The approval of more centralized currencies is even more difficult, especially SOL, which is not only prominently centralized, but has also been clearly listed as a security in the US SEC's accusation against Binance.
But despite this, the market is still positive about the approval of SOL and XRP ETFs. James Seyffart, an authoritative ETF analyst at Bloomberg, believes that the decision-making and approval timeline for SOL, XRP, LTC and HBAR ETFs may be extended to the end of 2025, and the SEC may approve Solana-related ETFs within two years. Nate Geraci, president of ETF Store, is more optimistic, saying that Solana ETF is likely to be approved by the end of next year.
There is naturally information to support the optimism, and the core factor points to the incoming President Trump. Trump's promises on encryption are being actively fulfilled, and changes in the internal and external regulatory environment have given the cryptocurrency industry stronger confidence.
In terms of industry regulation, the SEC, the main regulatory body for cryptocurrencies, is about to undergo a blood transfusion. The current SEC Chairman Gary Gensler has voluntarily stepped down and announced that he will leave on January 20, 2025, the day Trump officially takes office, finally pressing the pause button on the SEC's strict regulation in recent years. According to statistics, during his tenure, Gensler took enforcement actions against multiple entities including Coinbase, Kraken, Robinhood, OpenSea, Uniswap, MetaMask, etc., and completed thousands of enforcement cases in total, recovering about $21 billion in fines, making him a well-known opponent of encryption in the industry.
Although the next SEC chairman has not yet been selected, people familiar with the matter said that former SEC Commissioner Paul Atkins may take over Gary Gensler's position. As the battle over cryptocurrency securities becomes increasingly fierce, there are also rumors that the Trump administration wants to expand the power of the Commodity Futures Trading Commission (CFTC) and strengthen its regulatory power in the field of digital assets. If this move is realized, the securities attributes of crypto assets may be weakened.
From a broader external environment, the Trump administration is a gathering place for cryptocurrency players. Among all the cabinet ministers in Trump's new administration, in addition to well-known names in the market such as Musk and Howard Lutnick, Treasury Secretary Scott Bessent, National Security Advisor Michael Waltz, Director of National Intelligence Tulsi Gabbard, Commerce Secretary Howard Lutnick, and Secretary of Health and Human Services Robert Kennedy Jr. are all crypto supporters. Among them, Waltz, Lutnick, and Gabbard actually hold cryptocurrencies. Lutnick is a super fan of Bitcoin. Not only does he hold hundreds of millions of dollars in Bitcoin, his company Cantor Fitzgerald has provided custody services for Tether for many years.
It is obvious that the composition of the current government is completely different from the previous one. Since the superstructure is mostly supporters, the regulation of cryptocurrencies will inevitably be relaxed. If a comprehensive regulatory framework for crypto assets is established during the term of this government, the subsequent industry regulatory direction will be clearer.
In addition to regulation, Trump's companies have already targeted business opportunities. Recently, they have been making frequent moves to expand the crypto industry through investment and financing. Market sources said that Trump Media Technology is negotiating with the Intercontinental Exchange (ICE) to discuss the acquisition of the cryptocurrency exchange Bakkt. Just recently, Trump Media Technology Group submitted an application for a cryptocurrency payment service called Truth Fi, planning to enter the crypto payment field. The company's moves once again reflect the president's positive attitude towards crypto.
It is based on the above factors that the market has rekindled hope for altcoin ETFs. After all, with the end of the SEC chairman, the securities argument surrounding altcoins will hopefully cease, laying the initial foundation for the realization of ETFs.
On the other hand, even if the direction of altcoin ETFs is unpredictable, Wall Street is unwilling to give up this huge market of more than 3 trillion. Traditional institutions are building new investment products and derivatives around crypto assets to facilitate investors to include crypto assets in their asset portfolios.
Sui Chung, who runs crypto index provider CF Benchmarks, said mainstream investors tend to build direct general exposure through spot Bitcoin ETFs, as well as customize their exposure to the asset class through additional products. Among them, the most popular products include those involving commodity futures that are linked to cryptocurrencies and earn returns, and those that provide downside protection through options. Currently, the company is planning to launch Nasdaq Bitcoin Index options.
John Davi, chief investment officer of Astoria Portfolio Advisors, also mentioned that he is considering adding Bitcoin exposure to the ETF model portfolio he runs.
In general, although the current craze for copycat ETFs is still difficult to achieve under the current regulatory background, from a long-term perspective, with the relaxation of regulations and the increase in investor interest, it will become an objective reality for institutions to conduct in-depth research on crypto assets for the sake of traffic acquisition and market competition. On the product side, institutions will no longer be limited to Bitcoin and Ethereum, the productization and standardization of crypto assets will be further strengthened, and derivatives may usher in a blowout, aiming to clear obstacles for investors to enter the market. It can be foreseen that investors will have more ways to invest in products related to cryptocurrencies.
In addition to new products that have not yet been launched, existing ETFs will also benefit from this trend. Take the Ethereum spot ETF as an example. For a long time, the capital inflow of the Ethereum spot ETF has been weaker than that of Bitcoin. According to data, as of November 27, the net inflow of funds of the Ethereum spot ETF was about 240 million US dollars, while the net inflow of the Bitcoin spot ETF was as high as 30.384 billion US dollars, which is far from the difference.
The reason is that Ethereum is already at a disadvantage compared to Bitcoin due to its value stability and positioning differences, and the core staking function was rejected and restricted by the SEC, which further diluted investors' enthusiasm. In terms of cost, if investors directly hold ETH, they can obtain a staking income of nearly 3.5%, but if they hold institutional ETFs, not only can they not obtain this risk-free income, but they also have to pay additional management fees ranging from 0.15 to 2.5% to the issuer.
However, with the change of supervision, Ethereum spot ETF may not be without staking. After all, the SEC, which had previously firmly rejected staking, has changed its attitude. There are also precedents in Europe. Recently, European ETP issuer 21Shares AG announced that it would add a staking function to its Ethereum core ETP product.
Of course, although ETFs are good, the actual inflow of funds remains to be seen. Even Ethereum’s appeal to traditional capital is very limited. Grayscale’s Solana Trust has a total asset of only US$70 million. The investment purchasing power of altcoins does not seem as optimistic as imagined. Affected by this, Robert Mitchnik, head of BlackRock’s digital asset department, once mentioned that the company is not very interested in other crypto products besides Bitcoin and Ethereum.
But no matter how the subsequent approval progresses, the hype surrounding the copycat ETF has already begun. For the long-sick copycat market, this shot in the arm comes too timely.
