Bit coin pullback, altcoin ETF soaring.
The bull market frenzy is still spreading, although Bit coin has retreated after a surge, Ethereum has broken through $3,600, breaking the downward trend, and multiple sectors such as DeFi and Layer2 have seen a general rise, and the altcoin market has finally begun to show signs of new life. But a few days ago, the situation was very different, when Bit coin was approaching $100,000, and altcoins were in a state of despair, with the market in a state of survival.
Altcoins were in a slump, but Wall Street took an interest. Under the unprecedented regulatory boost, Wall Street has set its sights on altcoin ETFs, which has also brought some winter warmth to the long-dormant altcoin market.
Just a week ago, Bit coin continued to break through and reached $99,000, making headlines in major media, but the usually active community was unusually silent. In this institutionally-led bull market, most market participants did not benefit from the liquidity spillover, but instead saw their altcoins being constantly drained by Bit coin, presenting a downward trend, which left participants with a sense of unspoken suffering compared to the fanfare of the bull market propaganda.
A typical example is Ethereum, which is recognized as a mainstream coin compared to other altcoins, but in terms of price performance, the relative uptrend is far less than Bit coin, with the ETH/BTC exchange rate continuously declining during the year, from 0.053 to a low of 0.032, until it started to rebound recently. Even Ethereum is like this, let alone other coins.
But in recent days, the dormant altcoin market seems to have come alive. Coins like SOL, XRP, LTC and Link took the lead in launching last weekend, with Solana's DEX's daily trading volume exceeding $6 billion, and XRP surging to $1.63. This morning, Ethereum also saw a strong rise, breaking through $3,600, and the altcoin sector saw a general rise, with the DeFi sector up 8.47% in 24 hours.
As for the reasons for the rise of altcoins, in addition to the positive sentiment brought by the bull market, Wall Street's contribution is indispensable, and ETFs are the most direct manifestation.
Tracing back to the beginning of this bull market, 11 Bit coin spot ETFs ignited the craze, with the entry of Wall Street giants like BlackRock and Fidelity driving the mainstream adoption of Bit coin, and also quickly lowering the threshold for market participants to enter the crypto market. At that time, Bit coin and Ethereum spot ETFs were approved one after another, and the market was full of speculation about the next token that could captivate Wall Street. Based on market capitalization and capital considerations, Solana was once the most popular coin.
On June 27, asset management giant VanEck took the lead and filed an S-1 form with the SEC for the "VanEck Solana Trust", and the next day, 21Shares followed suit with an S-1 filing. On July 8, the Chicago Board Options Exchange (Cboe) formally filed a 19b-4 document for VanEck and 21Shares' Solana ETFs, bringing this SOL ETF speculation to a climax.
But the good times didn't last long, as the SEC's tough stance quickly cooled the altcoin ETF market. In August, market news said that Cboe had removed the 19b-4 applications for the two potential Solana ETFs from the "pending rule change" page on its website, and analysts said "the prospects are bleak".
But now, the market is still there, and the situation is quite different. On November 22, Cboe BZX Exchange filings showed that the exchange proposed to list and trade four Solana-related ETFs on its platform. The ETFs are sponsored by Bitwise, VanEck, 21Shares and Canary Funds, and are classified as "commodity-based trust shares" filed under Rule 14.11(e)(4). If the SEC formally accepts it, 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, crypto investment firm Canary Capital has filed with the US SEC for spot ETFs on XRP, Litecoin, and HBAR. And according to ETF Store president Nate Geraci, at least one issuer is currently attempting to file for an ADA (Cardano) or AVAX (Avalanche) ETF.
The emergence of altcoin ETFs has sparked widespread discussion, and the influx of distant capital has set the market ablaze. Is the wild west of crypto ETFs really coming?
From an objective perspective, reviewing the approval process for Bit coin and Ethereum, for a cryptocurrency to be approved for a spot ETF, it basically needs to meet two implicit requirements: one is not to be explicitly defined as a security by the SEC; and two, there needs to be a leading indicator to prove the stability and non-manipulability of the market, a typical feature of which is that the token can be traded on the Chicago Mercantile Exchange (CME) in the US. Looking at this, apart from Bit coin and Ethereum, the crypto market currently seems to have no one that meets the standard. The approval of more centralized currencies is even more difficult, especially for SOL, which not only has prominent centralization, but was also explicitly listed as a security in the SEC's allegations against Binance.
However, the market remains optimistic about the approval of SOL and XRP ETFs. James Seyffart, a respected ETF analyst at Bloomberg, believes that the decision and approval timeline for SOL, XRP, LTC and HBAR ETFs may be extended to the end of 2025, and the SEC may approve Solana-related ETFs within two years. ETF Store president Nate Geraci is even more optimistic, saying that Solana ETFs will likely be approved by the end of next year.
The optimism is naturally supported by information, with the core factor pointing to the incoming President Trump. Trump's promises for crypto are being actively fulfilled, and changes in the internal and external regulatory environment are giving the crypto industry greater confidence.
In terms of industry regulation, the SEC, the main regulatory body for cryptocurrencies, is about to undergo a change. Current SEC Chairman Gary Gensler will step down on January 20, 2025, the day Trump officially takes office, finally hitting the pause button on the SEC's tight regulation in recent years. Statistics show that during his tenure, Gensler took enforcement actions against entities such as Coinbase, Kraken, Robinhood, OpenSea, Uniswap, and MetaMask, completing thousands of enforcement cases and collecting about $21 billion in fines, making him a well-known crypto opponent in the industry.
Although the next SEC chairman has not yet been selected, insiders say former SEC commissioner Paul Atkins may replace Gary Gensler. In the face of the increasingly fierce battle over crypto securities commodities, there are also rumors that the Trump administration hopes to expand the powers of the Commodity Futures Trading Commission (CFTC) and strengthen its regulatory authority over the digital asset field. If this is realized, the securities attributes of crypto assets may be weakened.
Looking at the broader external environment, the Trump administration can be considered a gathering place for crypto players. Among all the cabinet members in Trump's new administration, in addition to well-known names like Musk and Howard Lutnick, 5 members including Treasury Secretary Scott Bessent, National Security Advisor Michael Waltz, Director of National Intelligence Tulsi Gabbard, Commerce Secretary Howard Lutnick, and Health and Human Services Secretary Robert F. Kennedy Jr. are crypto supporters, with Waltz, Lutnick, and Gabbard actually holding crypto assets, and Lutnick being a super fan of Bit coin, holding hundreds of millions of dollars worth of Bit coin and his company Cantor Fitzgerald has provided custody services to Tether for many years.
It is clear that the composition of this administration is quite different from the previous one, and with so many supporters at the top, the regulation of cryptocurrencies will inevitably tend to be more relaxed, and if a comprehensive regulatory framework for crypto assets is established during this administration's term, the subsequent industry regulatory orientation will also be more clear.
Beyond regulation, Trump's own companies have been eyeing business opportunities even earlier. They have been very active recently, trying to expand the crypto industry through investment and financing. Market news says Trump's media technology company is negotiating with Intercontinental Exchange (ICE) to acquire crypto exchange Bakkt. Just recently, the Trump Media & Technology Group submitted an application for a crypto payment service called Truth Fi, planning to enter the crypto payment field. The corporate moves once again reflect the president's positive attitude towards crypto.
It is precisely based on the above factors that the market has rekindled hope for Altcoin ETFs, after all, with the departure of the SEC chairman, the securities discourse surrounding Altcoins is expected to subside, laying a preliminary foundation for the realization of ETFs.
On the other hand, even if the Altcoin ETF is unpredictable, Wall Street is unwilling to give up this huge market of over $30 trillion, and traditional institutions are building new investment products and derivative tools around crypto assets to facilitate investors to incorporate crypto assets into their asset portfolios.
Sui Chung, the CEO of the crypto index provider CF Benchmarks, said that mainstream investors will establish direct plain vanilla exposure to spot BTC ETFs, and will also customize exposure to the asset class through additional products. The most popular products include those involving commodity futures linked to cryptocurrencies that generate yield, as well as products that provide downside protection through options. Currently, the company is planning to launch a Nasdaq BTC index option.
John Davi, Chief Investment Officer of Astoria Portfolio Advisors, also mentioned that they are currently considering adding BTC exposure to the ETF model portfolio they manage.
In general, although the current Altcoin ETF craze is still difficult to achieve under the current regulatory background, from a long-term perspective, with the relaxation of regulations and the increase in investor interest, due to traffic acquisition and market competition considerations, it will become an objective reality for institutions to delve into crypto assets. On the product side, institutions will no longer be limited to BTC and ETH, the productization and standardization of crypto assets will be further strengthened, and derivatives may usher in a boom, aiming to clear the barriers for investors to enter the market. It can be foreseen that investors will have more ways to invest in products related to cryptocurrencies.
In addition to the yet-to-be-launched new products, the existing ETFs will also benefit from this trend. Taking the ETH spot ETF as an example, the inflow of funds into the ETH spot ETF has been weaker than that of the BTC spot ETF for a long time. According to the data, as of November 27, the net inflow of funds into the ETH spot ETF was about $240 million, while the net inflow of the BTC spot ETF was as high as $30.384 billion, a huge gap between the two.
The reason for this is that ETH is inherently at a disadvantage compared to BTC in terms of value resilience and positioning, and the core staking function has been rejected by the SEC, further dampening investor enthusiasm. In terms of cost, if investors hold ETH directly, they can obtain a staking yield of nearly 3.5%, but if they hold institutional ETFs, not only can they not obtain this risk-free yield, but they also need to pay the issuer a management fee ranging from 0.15% to 2.5%.
However, with the change in regulation, the ETH spot ETF may not be unrelated to staking, after all, the SEC's previous firm rejection of staking has changed, and there are precedents in Europe as well. Recently, the European ETP issuer 21Shares AG announced the addition of staking functionality to its core ETH ETP product.
Of course, although ETFs are good, the actual inflow of funds remains to be seen. Even the attractiveness of ETH to traditional capital is very limited, with the total assets of the Solana Trust under Grayscale being only $70 million, and the investment purchasing power of Altcoins seems not as optimistic as imagined. Affected by this, Robert Mitchnik, the head of BlackRock's digital asset division, once mentioned that the company is not very interested in crypto products other than BTC and ETH.
However, regardless of how the subsequent approval progresses, the hype around Altcoin ETFs has already begun, and for the ailing Altcoin market, this stimulant has come at just the right time.
