The crypto market, which had been in a slump, finally received a much-needed boost. On March 2nd, local time in the US, Trump posted on social media that "after years of suppression by the Biden administration, the US crypto reserve will elevate the status of this critical industry, which is why my digital asset executive order directs the presidential working group to advance a crypto strategy reserve including XRP, SOL and ADA. I will ensure that the US becomes the world capital of cryptocurrencies. We are making America great again!" "Clearly, BTC and ETH, as well as other valuable cryptocurrencies, will be the core of the reserve. I also like Bitcoin and Ethereum!"
Trump's "shilling" had an immediate effect, with BTC and ETH rebounding over 10%, SOL surging more than 20%, ADA jumping over 70% to become the 8th largest cryptocurrency by market cap, and XRP's total circulating market cap surpassing Ethereum for the first time, while the total crypto market cap rebounded 9% to $3.25 trillion.
With Trump announcing the "US Crypto Strategy Reserve" plan, the most pro-crypto US Congress in history has emerged. As a channel for traditional capital to flow into the crypto ecosystem, the SEC's attitude towards crypto assets has also shifted from "strict regulation" to "friendly". Last month, the SEC consecutively confirmed the applications of several major US traditional companies for Litecoin, Dogecoin, Solana and XRP ETFs. According to Bloomberg analysts James Seyffart and Eric Balchunas, the market currently has a relatively high probability of approving spot ETFs for LTC, DOGE, SOL and XRP. Market expectations for the listing of ETFs for other major crypto assets on the US capital market have also increased significantly.
Related reading: 《Overview of the Latest Progress of Multiple Crypto ETFs: SEC Review Accelerates, SOL and LTC Lead the Way》
The Altcoins Whose ETF Applications Have Been Confirmed by the SEC
Looking back on the development of crypto ETFs, this process has been a roller coaster. After at least 30 rejections of Bitcoin spot ETF applications over the past 10 years, the market finally welcomed the official listing of the first US Bitcoin spot ETF on January 11, 2024. On July 23 of the same year, the crypto market witnessed another historic moment as the SEC officially approved the Ethereum spot ETF. 2024 can be said to be the first year of crypto ETFs. Bitcoin and Ethereum are the only two crypto ETFs that have been confirmed and approved so far.
From this perspective, the recent concentrated positive news is indeed rare, and it also conveys an important positive signal to the entire crypto market. If these ETFs are ultimately approved, they will bring huge potential opportunities to these underlying assets and the entire cryptocurrency market. Investors will be able to enter the market more easily, driving a large influx of capital, thereby enhancing the depth and stability of the market.
The following is an analysis of the Altcoins whose ETF applications have been confirmed by the SEC, covering the expected approval probability, regulatory compliance assessment basis, application progress, and market performance data for the past 30 days, sorted in descending order of the Bloomberg analysts' predicted regulatory approval rate.
LTC (Litecoin)
ETF Approval Probability: 90%, viewed by the SEC as a clone of Bitcoin, with decentralized characteristics, and most likely to be classified as a commodity. It currently has the most advanced approval progress among Altcoins.
Currently, Grayscale and Canary Capital have submitted Litecoin spot ETF applications, both of which have been accepted by the SEC. Bloomberg analyst Eric Balchunas believes that Litecoin will be the next cryptocurrency to receive SEC approval for a spot ETF.
DOGE (Dogecoin)
ETF Approval Probability: 75%, viewed by the SEC as a clone of Bitcoin and Litecoin, most likely to be classified as a commodity.
Currently, 2 institutions, Grayscale and Rex, have submitted Dogecoin spot ETF applications, both of which have been accepted by the SEC.
SOL (Solana)
ETF Approval Probability: 70%, currently still viewed by the SEC as a security.
Currently, 5 issuers, including Grayscale, Bitwise, VanEck, 21Shares and Canary Capital, have submitted Solana spot ETF applications, all of which have been accepted by the SEC. This is the first time the SEC has acknowledged the ETF application of a token previously referred to as a "security".
XRP (Ripple)
ETF Approval Probability: 65%, mainly affected by the SEC lawsuit, needs to resolve regulatory disputes.
Currently, including Grayscale, Bitwise, Canary Capital, 21Shares and Wisdomtree, have applied for XRP spot ETFs, and perhaps due to the previous lawsuit, only Grayscale's application has been accepted by the SEC.
Related reading: 《Overview of the Latest Progress of Multiple Crypto ETFs: SEC Review Accelerates, SOL and LTC Lead the Way》
How has Ethereum ETF performed since its approval?
The Ethereum ETF officially debuted in the US capital market on July 23 last year, with Ethereum prices around $3,200 at the time. Data shows that the net inflow of the Ethereum ETF has been about $2.82 billion in about half a year since its launch, equivalent to Wall Street buying nearly 1% of Ethereum's volume, while Ethereum has now fallen to around $2,500.
This is partly because Grayscale has been constantly selling off the Ethereum ETF, becoming the largest seller in the market, thus hindering the rise of Ethereum; on the other hand, Ethereum is more severely affected by whale selling than Bitcoin.
But the good news is that World Finance Liberty, an entity related to Trump, has been continuously increasing its Ethereum holdings. The net inflow of the ETF and the continuous buying by Trump-related institutions indicate that long-term investors have a positive attitude towards Ethereum in the increasingly open market environment.
By extension, if the ETFs for LTC, DOGE, SOL, and XRP are approved in 2025, although the ETFs of these assets will become a channel for traditional capital to flow in, it does not mean that these tokens will experience a significant upward trend.
Crypto ETF 2.0 Under Trump
Looking at the history of crypto ETF development, it is not difficult to see the significant positive impact of Trump's return to the White House on the entire market. Bloomberg analyst Eric Balchunas pointed out that before Trump won the election, the approval probability for all assets other than Litecoin was below 5%. He expects that as the applications enter the approval process and the SEC's decision deadlines approach, the approval probability for cryptocurrency ETFs will continue to rise.
Related reading: 《Coinbase2025 Outlook: More Crypto ETFs to Emerge; Stablecoins Remain the "Killer App"》
So the question is: Why has the progress of Altcoin ETFs been so difficult in the past? This also needs to be discussed from the perspective of the SEC's characterization of cryptocurrencies.
Are cryptocurrencies securities or commodities?
In fact, as early as 2014, the debate over whether cryptocurrencies should be legally defined as securities has already emerged.
That year, the sponsors of the Ethereum network raised funds for network development by selling 60 million Ether, and the network officially launched a year later. Due to its similarity to traditional initial public offerings (IPOs), the Ether ICO raised a fundamental question: Do crypto assets meet the definition of securities under U.S. federal securities law?
To this day, this question remains an important criterion for determining whether crypto currency ETFs can be approved by the SEC. The answer not only determines whether and how crypto assets can be sold to the public, but also whether we need to hold and trade these crypto assets according to the existing rules and market structure developed over the past 80 years for securities.
The Howey Test is at the core of this debate, stemming from the U.S. Supreme Court's ruling in the 1946 SEC v. Howey case. Howey Company leased citrus groves and promised to manage the land and sell the fruit, with its investors receiving a share of the profits. In this lawsuit, the SEC prevailed because the market regulator considered these contracts to meet the definition of securities.
From this, the famous Howey Test was born and has become an important standard in the U.S. securities legal framework for determining whether a transaction constitutes a "security". Its core logic revolves around four requirements: First, investors need to invest money or assets with monetary value (such as cash, cryptocurrencies, physical assets, etc.), i.e. "Investment of Money"; second, these funds need to be pooled into a "Common Enterprise", i.e. the investor's returns are closely linked to the overall success or failure of the project, rather than operating independently; third, the core motivation of the investor's participation needs to be based on "Expectation of Profit", i.e. their purpose is to obtain economic returns through investment, rather than just using the product or service; finally, the realization of profits must "Depend Predominantly on the Efforts of Others", i.e. investors do not directly participate in operations and management, but rely on the decisions and operations of third parties (such as the project team, promoters) (such as token value depending on team development rather than user mining). These four requirements are interrelated and together constitute the definition standard for determining whether an "investment contract" is a security. Especially in the cryptocurrency field, if the project party fails to avoid the above conditions, they may face the legal risk of being identified as unregistered securities.
In the Howey Test, the four conditions mentioned above must all be met, and the lack of any one of them means the transaction does not constitute a security. This standard can be said to provide compliance guidance for cryptocurrencies: if the project party wants to avoid being identified as a security, they need to at least break one of the conditions, such as emphasizing decentralization or user self-contribution.
In terms of actual case law, the SEC has stated that Bitcoin and Ethereum are "sufficiently decentralized" and therefore do not meet the fourth condition, so they are not securities. Whereas the institutional sale of XRP was ruled to be a security, and the secondary market circulation of Ripple tokens is a commodity.
As of the current situation, Bitcoin and Ethereum have been identified as commodities. The high probability of Litecoin's approval is due to its PoW model being the same as Bitcoin, and the Dogecoin protocol is a clone of the Litecoin protocol, which in turn is a clone of the Bitcoin protocol, so it also has a high probability of being recognized as a commodity. The classification of the attributes of Solana and Ripple tokens has not yet been conclusive, especially given the unresolved lawsuit between XRP and the SEC.
If you are interested in a deeper understanding of the tug-of-war between crypto projects and the SEC and a more detailed set of judgment criteria, you can check out a few well-known cases: 《Why Are These Five Tokens Securities? The SEC Provides the Answer》, 《ConsenSys Counterattacks the SEC Point by Point: Why Ethereum Is Not a Security》.
What impact will this have on the crypto market?
Bloomberg analysts expect the SEC to make a decision on the proposed Altcoin ETFs by October this year. It can be foreseen that if Altcoin ETFs are approved one after another, the various positive news in the future will most likely continue to attract more conservative and institutional investors to participate, thereby changing the investment structure of the market. Under this policy environment, the crypto market may experience increased liquidity, price increases, and changes in the investor structure. Therefore, the approval of more ETF products will also bring more capital to the crypto market, enhance market liquidity, and thus reduce price volatility.
In addition, due to the existence of regulatory arbitrage, the ETFs launched in the U.S. may directly lead to imitation by other countries and regions around the world. This imitation may to varying degrees promote the widespread adoption of cryptocurrencies globally, especially in regions with relatively lax regulations, where the adoption of cryptocurrencies will see more rapid growth. Policy convergence globally not only can effectively reduce the compliance costs of cross-border transactions, but also can further eliminate investors' concerns about legal risks, thereby promoting the participation of more institutions and individuals. This trend may accelerate the transformation of cryptocurrencies from fringe assets to mainstream financial instruments, and promote their rising status in the global economy.
With the further support of the Trump administration for the crypto industry, and as more and more U.S. states introduce "strategic Bitcoin reserve" legislation, and with the Republicans controlling both the Senate and the House, Congress may have the opportunity to pass crypto-related legislation. Once the legislation is passed, cryptocurrencies may have the hope of becoming a new asset class that is neither a security nor a commodity, which would be of epochal significance for the crypto market.
Where will crypto ETFs go this year?
Here are the industry institutions and KOLs' predictions for the development of crypto ETFs in 2025 (the original text is compiled from ChainCatcher, 《Crypto ETF Panorama in 2024: AUM Exceeds $120 Billion; From Fringe to Mainstream》):
Forbes predicts that the Ethereum ETF may be the first to integrate staking functionality, and spot ETFs for mainstream tokens like Solana are expected to be accelerated, and a weighted crypto index ETF may emerge to cover a wider range of assets.
Research firm Messari emphasizes that with the capital flow of Grayscale's GBTC turning positive, a spot Solana ETF is "almost inevitable" within the next one to two years, and the overall ETF inflow is expected to continue to rise.
Coinbase believes that while issuers may attempt to include more tokens like XRP, SOL, LTC, HBAR in ETF asset pools, such expansions may only benefit a few tokens in practice.
ETF issuer VanEck proposes a more specific regulatory outlook, predicting that the new leadership of the U.S. SEC or CFTC will approve multiple spot crypto currency ETPs including VanEck's Solana product, while Ethereum ETPs may enhance utility by supporting staking, and both Bitcoin and Ethereum ETPs may adopt physical creation/redemption mechanisms, and if SEC Rule SAB 121 is repealed, it will also drive traditional financial institutions to deeply participate in crypto custody.
Another issuer Bitwise is optimistic about Bitcoin ETFs, expecting their inflow to exceed 2024 levels in 2025, attracting trillions of dollars in institutional capital.
Overall, multiple institutions predict that the cryptocurrency ETF will see significant development in 2025, with the diversification and innovation of ETF products, regulatory adjustments, and the influx of mainstream capital becoming the core driving forces of the crypto market in the next two years.
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