Bitcoin pulls back, while altcoin ETFs soar.
The bull market is still spreading. Although Bitcoin has experienced a high and then a fall, Ethereum has broken through $3,600 against the trend. DeFi, Layer2 and other sectors have seen a general rise, and the altcoin market has finally shown signs of recovery. However, just a few days ago, the market situation was completely different. At that time, Bitcoin was close to $100,000, while altcoins were in trouble, and the market was filled with an atmosphere of strong desire for survival.
The altcoin market is in a slump, but Wall Street is stepping up its layout. In an unprecedented regulatory environment, Wall Street has set its sights on altcoin ETFs, injecting new vitality into the long-dormant altcoin market. Just a week ago, Bitcoin broke through $99,000 and made headlines, but the once active community seemed unusually silent. In this round of institutional-led bull market, many market participants did not receive liquidity overflows. Instead, the altcoins they held gradually fell under the blood-sucking effect of Bitcoin, showing a negative decline, which made investors feel disappointed and helpless in the market hype.
Ethereum is a recognized mainstream currency. Although it has a stronger foundation and prospects than other altcoins, its price trend lags behind Bitcoin. From the beginning of the year to date, the ETH/BTC exchange rate has been falling all the way, from 0.053 to 0.032, and has only recently rebounded. If even Ethereum is like this, the situation of other altcoins can be imagined.
Recently, the long-dormant altcoin market seems to have seen a revival. Solana (SoL), XRP, Litecoin (LTC) and Chainlink (Link) were the first to rise last weekend. Solana's decentralized exchange (DEX) had an average daily trading volume of over $6 billion, and XRP once climbed to $1.63. This morning, Ethereum broke through $3,600, the altcoin sector rose overall, and the DeFi sector rose by 8.47% in 24 hours.
In addition to the sentiment boost brought by the bull market, the driving role of Wall Street cannot be ignored for the rise in altcoin prices, and the launch of ETFs is the most direct manifestation of this.
Looking back at the beginning of this bull market, the launch of 11 Bitcoin spot ETFs triggered a market boom. The entry of Wall Street giants such as BlackRock and Fidelity accelerated the mainstreaming of Bitcoin and quickly lowered the threshold for investing in the crypto market. Bitcoin and Ethereum spot ETFs were approved one after another, and the market speculated on the next token that would attract Wall Street's interest. Due to market value and capital considerations, Solana became the most watched currency.
On June 27, asset management giant VanEck took the lead in submitting an ETF application for Solana to the U.S. Securities and Exchange Commission (SEC), followed by 21Shares the next day. On July 8, the Chicago Board Options Exchange (Cboe) submitted a 19b-4 document for the two companies' Solana ETF, which boosted the hype of the Solana ETF. But the good times did not last long. Due to the SEC's tough stance, the popularity of altcoin ETFs quickly cooled. In August, market rumors said that Cboe had removed the Solana ETF's 19b-4 application from its website, and analysts generally believed that it was unlikely to pass.
However, the market environment has changed now. On November 22, Cboe BZX Exchange again submitted four ETF proposals for Solana. These ETFs were initiated by Bitwise, VanEck, 21Shares and Canary Funds, and belonged to "commodity-based trust fund shares" and were submitted in accordance with regulations. If the SEC formally accepts it, the expected deadline for approval will be early August 2025.
Not only Solana, but more ETF applications are being actively promoted. In the past month, crypto investment company Canary Capital submitted spot ETF applications for three cryptocurrencies, including XRP, Litecoin, and HBAR, to the US SEC. In addition, ETF Store President Nate Geraci revealed that at least one issuer is currently trying to launch an ETF for ADA (Cardano) or AVAX (Avalanche). These trends show that the wave of altcoin ETFs is far from over, and the market will usher in more changes and opportunities.
With the emergence of the altcoin ETF craze, the market's attention to this emerging product has increased dramatically, and the influx of funds has made the entire market boil. Is the "Wild West" of crypto ETFs really coming?
From an objective perspective, looking back at the ETF approval process for Bitcoin and Ethereum, a successful spot crypto ETF generally needs to meet two implicit requirements: one is that it has not been explicitly identified as a security by the Securities and Exchange Commission (SEC); the other is that the market needs to be stable and uncontrollable, which is usually reflected in the ability of tokens to be traded on platforms such as the Chicago Mercantile Exchange (CME) in the United States, first through the futures market. According to this standard, except for Bitcoin and Ethereum, other currencies in the current crypto market do not seem to meet these requirements. In particular, Solana (SOL), which has a high degree of centralization and was clearly listed as a security in the SEC's allegations against Binance, faces more challenges in approval.
Despite this, the market remains optimistic about the approval of ETFs for currencies such as Solana (SOL), XRP, Litecoin (LTC) and HBAR. Bloomberg ETF analyst James Seyffart believes that the approval of ETFs for SOL, XRP, LTC and HBAR may be delayed until the end of 2025, while the SEC may approve Solana-related ETFs within two years. ETF Store President Nate Geraci is more optimistic and believes that Solana's ETF may be approved by the end of next year.
There are strong supporting factors behind the market's optimistic view, the core of which is the incoming Trump administration. Trump's promises on cryptocurrencies are being actively fulfilled, and changes in the internal and external regulatory environment have provided strong confidence for the cryptocurrency industry.
In terms of regulation, the SEC, the main regulator of cryptocurrencies, will see a leadership change. Current Chairman Gary Gensler announced that he will resign when Trump officially takes office on January 20, 2025, which will pause the strict regulation of the crypto industry. During Gensler's tenure, the SEC strictly enforced the law against multiple crypto platforms such as Coinbase and Kraken, with cumulative fines of approximately $21 billion, becoming a well-known crypto opponent in the industry. However, according to people familiar with the matter, former SEC Commissioner Paul Atkins may take over Gensler's position, and the Trump administration intends to expand the regulatory authority of the Commodity Futures Trading Commission (CFTC), thereby weakening the securities attributes of crypto assets.
The Trump administration's support for cryptocurrencies is reflected in the composition of its government members. Most of the candidates for key positions such as the Secretary of the Treasury and the National Security Advisor are crypto supporters. Some members, such as Howard Lutnick, even own a large amount of Bitcoin, and his company Cantor Fitzgerald provides custody services for Tether. These trends clearly indicate that cryptocurrency regulation will be relaxed in the future, and it is even possible that a comprehensive regulatory framework for crypto assets will be established during the Trump administration.
In addition to regulatory changes, Trump's companies have also begun to actively enter the crypto industry. Trump Media Technology is negotiating with the Intercontinental Exchange (ICE) to acquire the crypto exchange Bakkt and has submitted an application for crypto payment services, showing Trump's high attention and involvement in the crypto industry.
These factors make the market optimistic about the prospects of altcoin ETFs, especially after the change of SEC chairman, the securities debate surrounding altcoins is expected to subside, laying the foundation for the realization of ETFs.
On the other hand, even if the prospects of altcoin ETFs remain unclear, Wall Street will not easily give up this market of more than $3 trillion. Traditional institutions are actively developing new crypto products and derivatives so that investors can more easily incorporate crypto assets into their asset portfolios. Sui Chung of crypto index provider CF Benchmarks said that mainstream investors will not only gain direct exposure through spot Bitcoin ETFs, but also customize their exposure to crypto assets through derivatives such as futures and options.
However, although the prospects of crypto ETFs have attracted much attention, actual capital inflows will still take time to be tested. Even for the Ethereum spot ETF, despite the increase in capital inflows, there is still a significant gap in capital inflows compared to the Bitcoin spot ETF. Even so, as regulations loosen, the introduction of staking functionality may enhance the appeal of Ethereum ETFs.
Although the current investment purchasing power of altcoins is relatively limited, Robert Mitchnik, head of BlackRock's digital assets department, has also said that the company is not very interested in crypto products other than Bitcoin and Ethereum, but as supervision is gradually relaxed, more institutions will enter the crypto market, promoting the hype and development of altcoin ETFs. This is undoubtedly a shot in the arm for the long-dormant altcoin market.
