Bit retraced, altcoin ETFs soared.
The bull market frenzy is still spreading, despite Bit's pullback, Ethereum has broken through $3,600, breaking its 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 just a few days ago, the situation was very different, with Bit approaching $100,000 and altcoins languishing across the board, the market in a state of desperation.
Altcoins were in dire straits, but Wall Street took notice. Under unprecedented regulatory tailwinds, Wall Street has set its sights on altcoin ETFs, giving the long-dormant altcoin market a winter fire.
Just a week ago, Bit continued to break through and reached $99,000, making headlines across 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 overflow, but rather had their altcoins constantly drained by Bit, presenting a downward trend, which left participants with a sense of unspoken bitterness compared to the roaring 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, with the ETH/BTC exchange rate continuously declining during the year, from 0.053 to a low of 0.032, until recently starting to rebound. If even Ethereum is like this, the other coins are even worse off.
But in recent days, the dormant altcoin market seems to have come alive. Coins like SOL, XRP, LTC and LINK led the charge last weekend, with Solana's DEX averaging over $6 billion in daily trading volume, and XRP surging to $1.63. This morning, Ethereum also saw a strong rally, 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 behind the altcoin rally, 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 start of this bull market, 11 Bit spot ETFs ignited the frenzy, with the entry of Wall Street giants like BlackRock and Fidelity driving the mainstream adoption of Bit, and also rapidly lowering the threshold for market participants to enter the crypto market. At the time, Bit and Ethereum spot ETFs were successively approved, and the market was abuzz with speculation about the next token that could captivate Wall Street. Based on market capitalization and capital considerations, Solana was the most widely touted coin.
On June 27, asset management giant VanEck took the lead, filing an S-1 form with the SEC for the "VanEck Solana Trust", and the next day, 21Shares quickly followed suit with an S-1 filing. On July 8, the Chicago Board Options Exchange (Cboe) formally submitted a 19b-4 filing 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 fever. In August, market news indicated that Cboe had removed the 19b-4 applications for the two potential Solana ETFs from the "pending rule change" page on its website, with analysts bluntly stating that "approval is unlikely".
But now, the market is still there, and the situation is quite different. On November 22, Cboe BZX Exchange filed documents showing that the exchange is proposing 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" under Rule 14.11(e)(4). If the SEC formally accepts the filing, the final approval deadline is expected to be in early August 2025.
Not only Solana, but more ETFs are on the way. Just 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 standpoint, reviewing the approval process for Bit and Ethereum, for a cryptocurrency to be approved for a spot ETF, it generally 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 market's stability and non-manipulability, a typical feature being that the token can be traded on the Chicago Mercantile Exchange (CME) in the US. Looking at this, apart from Bit and Ethereum, the crypto market currently seems to have no one that meets the standard. Approval for 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 the decision 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 a Solana ETF will likely be approved by the end of next year.
Behind the optimism, there is naturally supporting information, with the core factor pointing to the incoming President Trump. Trump's promises on crypto are being actively fulfilled, and changes in the internal and external regulatory environment are giving the crypto industry much stronger confidence.
In terms of industry regulation, the SEC, the main regulatory body for cryptocurrencies, is about to undergo a major reshuffle. 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. According to statistics, during his tenure, Gensler has taken 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 sector. 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, holding hundreds of millions of dollars worth of Bit 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 crypto 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.
Trump's companies have been eyeing business opportunities even before regulation. They have been very active recently, seeking to expand the crypto industry through investment and financing. Market reports indicate that Trump Media & Technology Group is negotiating with Intercontinental Exchange (ICE) to potentially acquire the cryptocurrency exchange Bakkt. Recently, Trump Media & Technology Group submitted an application for a cryptocurrency payment service called Truth Fi, planning to enter the crypto payment sector. The company's moves once again reflect the president's positive attitude towards cryptocurrencies.
Based on these factors, the market has rekindled hopes for Altcoin ETFs. With the departure of the SEC chairman, the securities discourse around Altcoins is expected to subside, laying the groundwork for the realization of ETFs.
On the other hand, even if the path of Altcoin ETFs remains uncertain, Wall Street is unwilling to give up this massive over $30 trillion market. Traditional institutions are building new investment products and derivative tools around crypto assets to facilitate investors' inclusion of crypto assets in their portfolios.
Sui Chung, the CEO of crypto index provider CF Benchmarks, said that mainstream investors will establish direct exposure to spot BTC through BTC ETFs, and will also customize exposure to the asset class through additional products. The most popular products include those linked to crypto-related commodity futures that generate yields, as well as products that provide downside protection through options. The company is currently planning to launch a Nasdaq BTC index option.
John Davi, Chief Investment Officer of Astoria Portfolio Advisors, also mentioned that they are considering adding BTC exposure to the ETF model portfolio they manage.
Overall, although the current Altcoin ETF frenzy faces challenges in the current regulatory environment, from a long-term perspective, as regulations loosen and investor interest increases, for the sake of traffic acquisition and market competition, 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 see a surge, aiming to clear the barriers for investors to enter the market. It can be foreseen that investors will have more ways to invest in crypto-related products.
In addition to the yet-to-be-launched new products, existing ETFs will also benefit from this trend. Taking the ETH spot ETF as an example, the inflows to ETH spot ETFs have long been weaker than BTC, according to data, as of November 27, the net inflows to ETH spot ETFs were about $240 million, while the net inflows to BTC spot ETFs reached $30.384 billion, a huge gap.
The reason 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. From a cost perspective, if investors hold ETH directly, they can earn a yield of nearly 3.5% from staking, but if they hold institutional ETFs, not only can they not obtain this risk-free yield, but they also have to pay the issuer management fees ranging from 0.15% to 2.5%.
However, with the regulatory overhaul, the ETH spot ETF may not be unrelated to staking, as the SEC's previous firm rejection of staking has changed, and there are precedents in Europe launching such products. Recently, European ETP issuer 21Shares AG announced the addition of staking functionality to its core ETH ETP product.
Of course, while ETFs are good, the actual inflows remain to be seen. Even the appeal of ETH to traditional capital is quite limited, with the total assets of Grayscale's Solana Trust only $70 million, and the investment purchasing power of Altcoins seems not as optimistic as imagined. Affected by this, Robert Mitchnik, head of BlackRock's digital assets division, mentioned that the company has little interest in crypto products other than BTC and ETH.
Regardless of how the subsequent approvals progress, the hype around Altcoin ETFs has already begun, and this stimulant comes at a very timely moment for the ailing Altcoin market.
