Ripple bulls rejoiced after crypto fund manager Bitwise Asset Management filed for a spot XRP exchange-traded fund in the US.
“You’ve heard of the Fed Put. This is like the Trump Call,” Bloomberg Intelligence analyst Eric Balchunas said of the development late Tuesday on X.
In derivatives markets, call options are-all or-nothing bets on an asset hitting a certain price. If an asset hits the call’s price, it pays out big.
Companies deciding to file for crypto ETF approvals — whether XRP, Solana, or any others — are de facto bets on Donald Trump winning the presidency, Balchunas said.
That’s because a Trump win would ensure the departure of anti-crypto Securities and Exchange Commission Chair Gary Gensler.
At a Bitcoin conference in July, Trump promised to fire Gensler if he wins the election.
If Gensler goes, “anything’s possible,” Balchunas said.
But if Vice President Kamala Harris wins, new crypto ETFs probably won’t get approved.
“The ‘call’ expires worthless,” he said.
XRP is a crypto asset developed, issued, and partially managed by US-based company Ripple Labs. The crypto is pegged to facilitate faster cross-border transactions, and is frequently listed as an upstart competitor to the Swift system.
Bitwise is the only asset manager to file an application for an ETF for XRP.
But it’s not the first time a firm has submitted a filing for a crypto ETF beyond Bitcoin and Ethereum.
In June, asset manager VanEck filed with the SEC for a spot Solana ETF.
Despite the SEC rejecting VanEck’s associated 19b-4 application in August, Matthew Sigel, the firm’s head of digital assets research, said the application “remains in play.”
‘Start the clock ticking’
Since 2020, Ripple has been fighting SEC claims that it raised $1.3 billion by selling XRP as an unregistered security.
A 2023 ruling found XRP isn’t a security when traded on public exchanges, but institutional sales violated securities laws by promising profits based on Ripple’s efforts, making them investment contracts under US law.
In the US, securities must be registered to ensure investors get full disclosure and legal protections, which Ripple allegedly bypassed.
In August, the case ended with Ripple ordered to pay a $125 million fine.
Although the judge presiding over the case ruled that secondary sales of XRP on crypto exchanges were not securities offerings, that may not matter for Bitwise’s XRP ETF application.
“This isn’t about whether the SEC thinks XRP is a security or not,” Katalin Tischhauser, head of investment research at crypto bank Sygnum, told DL News. “The SEC’s stance needs to change on what they regard as an acceptable surveillable market.”
The SEC has previously argued that no spot crypto ETFs can be listed on US exchanges until there is a highly correlated, regulated futures market for the corresponding asset.
Such a market, Tischhauser said, only exists for Bitcoin and Ethereum and no other crypto asset.
Bitcoin and Ethereum are the only crypto assets with regulated futures markets on the Chicago Mercantile Exchange.
Tischhauser said Bitwise’s XRP ETF application was likely done to “start the clock ticking” in the hope that there will be a change in the SEC’s stance after the election.
Inevitable?
Bitwise’s filing comes after Ripple Labs CEO Brad Garlinghouse said after the approval of Ethereum ETFs earlier this year that ETFs for XRP and other crypto assets were “inevitable.”
“People don’t just want exposure to one commodity,” Garlinghouse said on Fox Business News at the time.
But whether there is enough demand to warrant an XRP ETF isn’t clear.
Spot Bitcoin ETFs launched in January exceeded expectations, attracting some $18 billion of fresh capital.
However, the more recent Ethereum ETFs have underperformed, experiencing $572 million of outflows since their July launch.
Investment manager Grayscale’s XRP Trust has just $1.5 million worth of assets under management, compared to over $73 million in its Solana Trust.
Since the SEC initiated its lawsuit against Ripple Labs, XRP has dropped from the second-biggest crypto asset to the seventh-biggest.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
