In July this year, the US Securities and Exchange Commission (SEC) officially approved the trading application for the Ethereum spot ETF, making ETH the second cryptocurrency after BTC to be listed on the traditional financial trading market in the form of an ETF.
However, four months have passed, and the traditional financial market has not shown the same enthusiasm for ETH as it has for BTC. The reason for this is that the narrative of ETH as a technology-driven product is less appealing to the traditional market compared to BTC's "digital gold" narrative; in addition, the continued selling pressure from Grayscale ETHE and the SEC's restriction on the staking function of the Ethereum spot ETF have also objectively weakened its attractiveness.
For investors in the Ethereum spot ETF, currently holding ETH through the ETF means missing out on staking rewards (currently around 3.5%), and they also need to pay management fees of 0.15% to 2.5% to the ETF issuer. While some investors may not mind forgoing this income due to convenience and security considerations, some investors may turn to other alternative solutions or even postpone their investment inclination.
With the election of Trump, this situation is now seeing a turnaround. The market expects the cryptocurrency regulatory environment to improve effectively, and the Ethereum spot ETF is also expected to introduce staking functions, thereby amplifying the attractiveness of this investment product and helping to boost the strength of ETH.
· On November 13, ETF issuer BlockBeats announced that it had acquired the Ethereum staking service provider Attestant. BlockBeats CEO Hunter Horsley said in an interview that currently one-fifth of BlockBeats' clients want to earn income through staking, but a few years from now, most clients may have this demand.
· On November 20, European cryptocurrency ETP issuer 21Shares AG announced the addition of staking functionality to its Ethereum core ETP product, renaming it the "Ethereum Core Staking ETP" (ETHC), which is currently listed and traded on the Swiss Stock Exchange, the German Xetra exchange, and the Euronext Amsterdam exchange.
· On November 22, Gary Gensler, the SEC chairman who is seen as opposing cryptocurrency regulation, announced that he will step down on January 20, 2025, further increasing the probability of the Ethereum spot ETF introducing staking functionality.
Which cryptocurrencies will benefit?
First, the introduction of staking functionality to the Ethereum spot ETF will directly benefit ETH - this will directly amplify the investment attractiveness of the Ethereum spot ETF, and this may also be one of the reasons for the recent relative strength of ETH.
In addition, this change will also indirectly benefit the staking sector and the higher-level re-staking sector.
In the staking sector, Lido (LDO), Rocket Pool (RPL), Ankr (ANKR), and Frax (FXS) have all gone through a prolonged consolidation period and have shown some signs of recovery.
LDO and RPL in particular need to be highlighted. In June this year, the SEC sued Lido and Rocket Pool, claiming that the stETH and rETH issued by the two platforms constituted securities, which had caused a short-term plunge in LDO and RPL at the time. It is expected that with Gensler's departure, this lawsuit will be resolved in a more amicable manner.
In the re-staking sector, EigenLayer (EIGEN) has shown a remarkably strong rebound after hitting an all-time low last week, temporarily holding the key $3 level even as BTC has seen a significant pullback. As the leading protocol in the sector, the subsequent performance of EIGEN is expected to have a significant impact on the future performance of projects like ether.fi (ETHFI), Renzo (REZ), and Puffer (PUFFER) in the ecosystem.
In addition to these cryptocurrencies, other companies providing staking services are also likely to attract more business from the opportunity to introduce staking functionality to the Ethereum spot ETF, such as Coinbase (COIN), which is already listed on the US stock market. As a major custodian for Bitcoin spot ETFs and Ethereum spot ETFs, Coinbase also issues the liquidity derivative token cbETH, and while there is no definite news yet, it can be expected that some ETF service providers will tend to continue to choose Coinbase's services.
Limited business relevance, sentiment-driven
Looking at the recent market performance, ETH, the staking sector's LDO and RPL, and the re-staking sector's EIGEN and ETHFI have all achieved relatively good rebounds.
However, even if the Ethereum spot ETF is confirmed to be able to introduce staking functionality, this business may still be difficult to flow into cryptocurrencies native to the crypto world, such as stETH, rETH, and eETH, which are liquidity staking tokens (LSTs) or liquidity re-staking tokens (LRTs). ETF issuers are more likely to either acquire staking service providers like Bitwise, or directly choose platforms with better reputation like Coinbase, as mentioned earlier.
Therefore, at the end of the day, the rapid rebound in the staking and re-staking sectors is still mainly driven by market sentiment in the short term, with relatively fewer actual business opportunities. But then again, sentiment is the most precious thing in a bull market, and this is not a bad thing for the long-dormant Ethereum ecosystem.
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