Original author: Tuo Luo Finance
Bitcoin's pullback has led to a surge of competing coin ETF applications like mushrooms after rain.
The bull market trend continues to spread. Although Bitcoin has seen highs and lows, Ethereum has reversed its downward trend and broken through $3,600, with multiple sectors including DeFi and Layer 2 seeing widespread gains, signaling a rebirth for the competing coin market. However, just a few days ago, the situation was vastly different; at that time, Bitcoin was close to $100,000, while competing coins were in despair, with the market showing signs of desperation.
The situation for competing coins is grim, but Wall Street has taken an interest. Under unprecedented regulatory benefits, Wall Street has turned its attention to competing coin ETFs, bringing warmth to the long-silent competing coin market.
Just a week ago, Bitcoin continued to break through, reaching $99,000 and making headlines across major media. However, the usually active community has shown unusual silence. In this institutional-led bull market, most market participants did not experience liquidity overflow; instead, the competing coins they held were continuously drained by Bitcoin, showing a downward trend, contrasting sharply with the vibrant bull market, leaving participants feeling frustrated.
A typical example is Ethereum. Compared to other competing coins, ETH is already recognized as a mainstream currency. However, in terms of price trends, its growth is far behind Bitcoin. The exchange rate between ETH and BTC has continuously decreased throughout the year, dropping from 0.053 to a low of 0.032 before recently starting to rebound. If Ethereum is in such a position, other coins fare even worse.
However, just recently, the dormant competing coin market seems to have come back to life. Coins like SOL, XRP, LTC, and Link initiated a rally last weekend, with Solana's DEX daily trading volume surpassing $6 billion and XRP peaking at $1.63. Ethereum even surged past $3,600, leading to a widespread increase across competing coins.
Regarding the reasons behind the rise of competing coins, aside from the positive sentiment brought by the bull market, Wall Street has played an indispensable role, with ETFs being the most direct representation.
Recalling the start of this bull market, the approval of 11 Bitcoin spot ETFs ignited the frenzy, with the entry of Wall Street giants like BlackRock and Fidelity pushing Bitcoin's mainstreaming process and rapidly lowering the barriers to entry for participating in the cryptocurrency market. At that time, Bitcoin and Ethereum spot ETFs were successively approved, and the market was abuzz with discussions about the next token likely to attract Wall Street's interest. Due to market capitalization and capital considerations, Solana was once the most favored coin.
On June 27, asset management giant VanEck took the lead, submitting an S-1 form for the "VanEck Solana Trust" to the SEC. The following day, 21Shares quickly followed suit with its own S-1 application. On July 8, the Chicago Board Options Exchange (Cboe) formally submitted 19b-4 documents for VanEck and 21Shares' Solana ETFs, bringing this wave of SOL ETF speculation to a climax.
The good times did not last long, as the SEC's tough stance quickly cooled the enthusiasm for competing coin ETFs. In August, market news indicated that CBOE had removed the 19b-4 applications for two potential Solana ETFs from its website's "Pending Rule Changes" page, with analysts stating it was "hopeless".
However, now, the market still exists, but the circumstances have changed significantly. On November 22, Cboe BZX exchange documents indicated that the exchange proposed to list and trade four types of Solana-related ETFs on its platform. The ETFs were initiated by Bitwise, VanEck, 21Shares, and Canary Funds, classified as "commodity-based trust fund shares" and submitted under Rule 14.11(e)(4). If the SEC formally accepts this, the final approval deadline is expected to be in early August 2025.
Not only Solana, but more ETFs are on the way. In the past month, cryptocurrency investment firm Canary Capital submitted spot ETF applications for three cryptocurrencies, XRP, Litecoin, and HBAR, to the SEC. According to Nate Geraci, president of ETF Store, at least one issuer is attempting an ETF application for ADA (Cardano) or AVAX (Avalanche).
The emergence of competing coin ETFs has sparked widespread discussion, and the inflow of faraway funds has set the market ablaze. Is the wild west of cryptocurrency ETFs really coming?
From an objective perspective, reviewing the previous approval processes for Bitcoin and Ethereum ETFs, approval generally requires meeting two major implicit requirements: one is not being explicitly classified as a security by the SEC; the second is having preliminary indicators proving market stability and non-manipulability, typically characterized by tokens being traded on the Chicago Mercantile Exchange (CME) first in the futures market. From this perspective, aside from Bitcoin and Ethereum, there seems to be no other cryptocurrencies in the market that meet these standards. More centralized coins face even greater challenges in approval, especially SOL, which has not only been prominently centralized but has also been explicitly classified as a security in the SEC's allegations against Binance.
Despite this, the market remains positive about the approval of ETFs for SOL and XRP. James Seyffart, an ETF analyst at Bloomberg, believes that the decision timeline for SOL, XRP, LTC, and HBAR ETFs may extend to the end of 2025, with the SEC potentially approving Solana-related ETFs within two years. Nate Geraci, president of ETF Store, appears even more optimistic, stating that the Solana ETF is highly likely to be approved by the end of next year.
Behind the optimism are supportive messages, with the core factor pointing to the incoming President Trump. Trump's commitments to cryptocurrency are actively being fulfilled, and the changes in both internal and external regulatory environments provide stronger confidence for the cryptocurrency industry.
From an industry regulation perspective, the main regulatory body for cryptocurrency, the SEC, is about to undergo a significant change. Current SEC Chairman Gary Gensler has announced his resignation effective January 20, 2025, the day Trump officially takes office, effectively pausing the SEC's stringent regulations of recent years. During his tenure, Gensler took enforcement actions against several entities including Coinbase, Kraken, Robinhood, OpenSea, Uniswap, and MetaMask, completing thousands of enforcement cases and recovering approximately $21 billion in fines, making him a public enemy in the crypto community.
Although the next SEC chairman has not yet been appointed, insiders indicate that former SEC commissioner Paul Atkins may take over Gary Gensler's position. Amid the intensifying battle over the classification of cryptocurrency as securities, there are also rumors that the Trump administration seeks to expand the power of the Commodity Futures Trading Commission (CFTC) to strengthen its regulatory authority over the digital asset space. If this happens, the classification of crypto assets as securities may be weakened.
From a broader external perspective, the Trump administration is a gathering place for cryptocurrency players. Among all the cabinet member candidates of the new Trump government, aside from well-known market names like Musk and Howard Lutnick, five members including Treasury Secretary Scott Bessent, National Security Advisor Michael Waltz, Director of National Intelligence Tulsi Gabbard, Secretary of Commerce Howard Lutnick, and Secretary of Health and Human Services Robert F. Kennedy Jr. are all supporters of cryptocurrency. Among them, Waltz, Lutnick, and Gabbard actually hold cryptocurrencies, with Lutnick being a super fan of Bitcoin, holding hundreds of millions of dollars in Bitcoin, and his company Cantor Fitzgerald has provided custodial services for Tether for many years.
It is evident that the new government's composition is drastically different from before. With many supporters in the upper echelons, the regulation of cryptocurrencies is bound to trend towards leniency. If a comprehensive regulatory framework for crypto assets is established during this government's term, subsequent industry regulatory directions will also become clearer.
Beyond regulation, Trump's enterprises have been eyeing business opportunities earlier. Recently, they have been active, striving to broaden the scope of the cryptocurrency industry through investment and financing. Market news states that Trump Media Technology Company is negotiating with the Intercontinental Exchange (ICE) regarding a potential 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 cryptocurrency payment field. The company's actions once again reflect the president's positive attitude toward cryptocurrencies.
Based on the above factors, the market has reignited hope for competing coin ETFs. After all, with the end of the SEC chairman's term, discussions surrounding the classification of competing coins as securities may cease, laying a preliminary foundation for the realization of ETFs.
On the other hand, despite the unpredictable trajectory for competing coin ETFs, Wall Street is unwilling to abandon this enormous market worth over $3 trillion. Traditional institutions are building new investment products and derivatives around crypto assets to facilitate investors' incorporation of crypto assets into their portfolios.
Sui Chung, managing director of cryptocurrency index provider CF Benchmarks, stated that mainstream investors will establish direct ordinary exposure trends through spot Bitcoin ETFs and will also use additional products to customize exposure to asset categories. Among the most popular products are those involving commodity futures linked to cryptocurrencies that earn yields, as well as products providing downside protection through options. The company is currently planning to launch Nasdaq Bitcoin index options.
John Davi, chief investment officer at Astoria Portfolio Advisors, also mentioned that he is considering increasing Bitcoin exposure in the ETF model portfolio he manages.
Overall, despite the current difficulties in realizing the wave of competing coin ETFs under the existing regulatory backdrop, from a long-term perspective, as regulations loosen and investor interest increases, institutions will objectively delve deeper into crypto assets due to considerations of acquiring traffic and market competition. On the product front, institutions will no longer be limited to Bitcoin and Ethereum, and the productization and standardization of crypto assets will be further strengthened, with derivative products potentially experiencing a boom aimed at smoothing the entry barriers for investors. It is foreseeable that investors will have more ways to invest in products related to cryptocurrencies.
Existing ETFs will also benefit from this trend, in addition to new products yet to be launched. For example, the Ethereum spot ETF has seen weaker capital inflows compared to Bitcoin for a long time. As of November 27, the net capital inflow for the Ethereum spot ETF was approximately $240 million, while the Bitcoin spot ETF saw a staggering net inflow of $30.384 billion, indicating a vast difference between the two.
The reasons are that Ethereum inherently has disadvantages compared to Bitcoin due to its value stability and positioning differences, and the SEC's rejection of its core staking function has further diluted investor enthusiasm. From a cost perspective, if investors hold ETH directly, they can earn nearly 3.5% staking yields, but if they hold institutional ETFs, not only do they lose this risk-free yield, but they also have to pay management fees ranging from 0.15% to 2.5% to the issuers.
However, with the changes in regulation, the Ethereum spot ETF may not be incompatible with staking. After all, the SEC's previously firm rejection of staking has shifted, and there have been precedents in Europe. Recently, European ETP issuer 21Shares AG announced the addition of staking features to its Ethereum core ETP product.
Of course, while ETFs are promising, actual capital inflows are yet to be observed. Even Ethereum's attractiveness to traditional capital is quite limited, with the total assets of Grayscale's Solana Trust only amounting to $70 million, suggesting that the purchasing power for competing coins may not be as optimistic as imagined. This has led Robert Mitchnik, head of BlackRock's digital asset division, to mention that the company has little interest in crypto products other than Bitcoin and Ethereum.
Regardless of how the subsequent reviews progress, the hype surrounding competing coin ETFs has already begun, providing a much-needed boost for the long-suffering competing coin market.
(The above content is excerpted and reprinted with the authorization of partner MarsBit, original link | Source: Tuo Luo Finance)
Statement: The article only represents the author's personal views and opinions, not the views and positions of Block. All content and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and trades, and the author and Block will not bear any responsibility for any direct or indirect losses resulting from investors' trades.
"Wall Street institutions are eyeing the competing coin market" was first published in (Block).
