The approval of an ETH ETF complicates a common tenet among Bitcoin investors.
The plight of Bitcoiners. While many crypto assets surged early last week following the announcement that Ethereum would receive spot ETF approval and long-awaited regulatory clarity that it was not a security, the development has taken the wind out of the Bitcoin ecosystem’s sails. What’s going on?
Despite Bitcoin’s recovery amid the then-rumored possibility of an ETH ETF approval, last week was Bitcoin dominance’s worst week since the arrival of a spot BTC ETF in January, which was due to massive redemptions from the Grayscale Bitcoin Trust (GBTC).
If conducted today, Ethereum’s initial coin offering (ICO) would constitute an illegal securities offering; given this fact, the precedent established by the ETH ETF approval highlights that any crypto asset — regardless of its origins — can be a non-security and deals a significant blow to the theory that Bitcoin has a unique regulatory status.
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The loss of this defining function not only drags down BTC, but also severely affects many related ecosystem tokens.
While Bitcoin remains the oldest blockchain in existence, its non-security status is no longer a meaningful differentiator when considering other crypto investments and forces the ecosystem to compete more on its technological advantages.
Unfortunately, Bitcoin’s historical resistance to technological change and pursuit of ultra-hard currency has resulted in a degraded user experience and forced developers to adopt workarounds to deploy applications, causing the network to score low in this category…
Previously, assets created using Bitcoin’s native standards such as Ordinals, BRC-20, and Runes have generated a lot of interest among investors seeking Bitcoin upside, but are painful to interact with and offer no value beyond speculation.
Developers have attempted to inject enhanced utility into the Bitcoin network through Layer 2, however, existing solutions are merely sidechains that do not inherit any security from the base layer consensus.
Recognizing that BTC is not the only asset with regulatory clarity and access to traditional finance, market participants appear to be rotating out of BTC-related tokens, with many of these tokens experiencing massive lows compared to Ethereum native tokens.
While these tokens experience huge rallies at times, the loss of the regulatory capture narrative should cause these investments to trade at valuations in line with fundamentals comparable to other on-chain applications.
