Bitcoin pullback, altcoin ETFs soar
The bull market is still spreading, although Bitcoin has seen ups and downs, Ethereum has reversed the downtrend and broken through $3,700, and sectors such as DeFi and Layer2 have generally risen, the altcoin market has finally started to show vitality. But a few days ago, the situation was very different, when Bitcoin was close to $100,000, but altcoins were all in despair, and the market was in a life-and-death state.
Altcoins were in dire straits, but Wall Street was eyeing them hungrily. Under the unprecedented regulatory tailwind, Wall Street has set its sights on altcoin ETFs, igniting the long-dormant altcoin market.
Just a week ago, Bitcoin kept breaking through $99,000, making headlines in major media, but the usually active community was unusually silent. In this round of institutionally-led bull market, most market participants did not get the liquidity spillover, but instead their held altcoins were constantly being drained by Bitcoin, showing a negative growth trend, which was bitter for the participants compared to the fanfare of the bull market propaganda.
A typical example is Ethereum, which is recognized as the mainstream coin among altcoins, but in terms of price trend, the relative increase is far less than that of Bitcoin. The ETH/BTC exchange rate has been declining since the beginning of the year, from 0.053 to 0.032, only recently starting to rebound, and even Ethereum is like this, let alone other coins.
Wall Street veterans also start playing with altcoins
But recently, the dormant altcoin market seems to have become active again, with coins like SOL, XRP, LTC and Link leading the way last weekend, with Solana's DEX averaging over $6 billion in daily trading volume, and XRP soaring to $1.63. This morning, Ethereum made a strong rise and broke through $3,600, and the altcoin sector saw a general rise, with the DeFi sector up 8.47% in 24 hours.
As for the reason for the rise of altcoins, in addition to the positive sentiment brought by the bull market, the contribution of Wall Street is indispensable, and ETFs are the most intuitive manifestation.
Tracing back to the beginning of this bull market, 11 Bitcoin spot ETFs sparked a craze. The entry of Wall Street giants like BlackRock and Fidelity has promoted the mainstream adoption of Bitcoin and also quickly lowered the threshold for participation in the crypto market. At that time, Bitcoin and Ethereum spot ETFs were successively approved, and the market was full of speculation about the next token that could excite Wall Street. Considering market capitalization and capital, Solana was once the most popular coin.
On June 27, asset management giant VanEck was the first to file an S-1 form with the SEC for the "VanEck Solana Trust". The next day, 21Shares followed suit and filed an S-1 application. On July 8, the Chicago Board Options Exchange (Cboe) formally filed the 19b-4 documents for VanEck and 21Shares' Solana ETFs, pushing this SOL ETF hype to a climax.
The good times didn't last long, the SEC's tough stance quickly cooled this altcoin ETF. In August, market news said that Cboe had removed the 19b-4 applications for the two potential Solana ETFs from its "pending rule change" page on its website, with analysts saying "there is no hope of passing".
But now the market is still there, but the situation is very different. On November 22, Cboe BZX Exchange filings showed that the exchange plans to list and trade four Solana-related ETFs on its platform. These ETFs are sponsored by Bitwise, VanEck, 21Shares and Canary Funds, and are classified as "commodity-based trust shares" and filed under Rule 14.11(e)(4). If the SEC formally accepts, 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. According to ETF Store president Nate Geraci, at least one issuer is currently trying to apply for an ADA (Cardano) or AVAX (Avalanche) ETF.
Wall Street veterans also start playing with altcoins
The emergence of altcoin ETFs has sparked widespread discussion, and the influx of funds from afar has set the market boiling. Has the wild west of crypto ETFs really arrived?
Objectively speaking, reviewing the approval process of Bitcoin and Ethereum, to get a crypto spot ETF approved, there are two implicit requirements: one is that it has not yet been clearly defined as a security by the SEC; and two, there must be leading indicators to prove market stability and non-manipulability. The typical feature is that the token can be traded on the Chicago Mercantile Exchange (CME) futures market. From this perspective, apart from Bitcoin and Ethereum, the current crypto market does not seem to have any that meet the standard. And it is even more difficult for more centralized coins to be approved, especially SOL, which not only has a high degree of centralization, but was also explicitly listed as a security in the SEC's allegations against Binance.
However, despite this, the market still holds a positive attitude towards the approval of SOL and XRP ETFs. ETF expert Bloomberg ETF analyst James Seyffart 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 a Solana ETF is highly likely to be approved before the end of next year.
Supporting the optimistic sentiment are of course information, and the core factor points to the incoming President Trump. Trump's promises about crypto are being actively fulfilled, and changes in the internal and external regulatory environment have boosted the crypto industry's confidence.
In terms of industry regulation, the SEC, the main regulatory body for cryptocurrencies, is about to undergo a major overhaul. The current SEC Chairman Gary Gensler will voluntarily resign and announce his departure on January 20, 2025, the day Trump officially takes office, finally hitting the pause button on the SEC's strict regulation in recent years. According to statistics, during his tenure, Gensler took enforcement actions against entities such as Coinbase, Kraken, Robinhood, OpenSea, Uniswap, and MetaMask, completing thousands of enforcement cases and recovering about $21 billion in fines, becoming a well-known crypto opponent in the industry.
Although the next SEC chairman has not yet been selected, insiders say that former SEC commissioner Paul Atkins may replace Gary Gensler. As the crypto securities dispute intensifies, there are also rumors that the Trump administration hopes to expand the power of the Commodity Futures Trading Commission (CFTC) and strengthen its regulatory power in the digital asset field. If this is realized, the securities attributes of crypto assets may be weakened.
From a broader external environment, the Trump government can be described as a gathering place for crypto players. Among all the cabinet members of the Trump new government, in addition to Musk and Howard Lutnick, who are well known in the market, Treasury Secretary Scott Besent, National Security Advisor Michael Waltz, Director of National Intelligence Tulsi Gabbard, Commerce Secretary Howard Lutnick, and Health and Human Services Secretary Robert Kennedy are all supporters of cryptocurrencies. Among them, Waltz, Lutnick, and Gabbard actually hold cryptocurrencies. Lutnick is a super fan of Bitcoin, not only holding hundreds of millions of dollars worth of Bitcoin, but his company Cantor Fitzgerald has also provided custody services for Tether for many years.
It is clear that the composition of this administration is completely different from the previous one, and since the superstructure is mostly supportive, the regulation of cryptocurrencies will inevitably be relaxed. If a comprehensive regulatory framework for crypto assets is built during this administration's term, the subsequent industry regulatory orientation will be clearer.
In addition to regulation, Trump's own companies have already spotted the business opportunities earlier, and have been active recently, trying to expand the crypto industry through investment and financing. Market news says that Trump Media & Technology Group is negotiating with Intercontinental Exchange (ICE) to discuss the proposed acquisition of crypto exchange Bakkt. Just recently, the Trump Media & Technology Group has submitted an application for a crypto payment service called Truth Fi, planning to enter the crypto payment field. The company's moves once again reflect the president's positive attitude towards cryptocurrencies from the side.
Based on the above factors, the market has rekindled hope for Altcoin ETFs, as the departure of the SEC chairman is expected to end the securities debate surrounding Altcoins.
On the other hand, even though the direction of Altcoin ETFs is difficult to predict, Wall Street is unwilling to give up this massive market of over $30 trillion. Traditional institutions are building new investment products and derivatives around crypto assets to facilitate investors' inclusion of crypto assets in their asset portfolios.
Sui Chung, the CEO of crypto index provider CF Benchmarks, said that mainstream investors will establish direct general exposure to BTC through spot BTC ETFs, and will also customize exposure to the asset class through add-on products. The most popular products include those linked to cryptocurrencies and generating yields, involving commodity futures, 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 he is currently considering adding BTC exposure to the ETF model portfolio he manages.
Overall, although the Altcoin ETF frenzy is still difficult to realize in the current regulatory environment, in the long run, as regulations are relaxed and investor interest increases, it will become an objective reality that institutions will delve into crypto assets for traffic acquisition and market competition. On the product side, institutions will no longer be limited to BTC and ETH, and the productization and standardization of crypto assets will be further strengthened, with derivatives potentially experiencing 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 crypto-related products.
In addition to the new products that have not yet been launched, the existing ETFs will also benefit from this trend. Taking the ETH spot ETF as an example, the capital inflow of the ETH spot ETF has been weaker than that of the BTC spot ETF in the long run. Data shows that as of November 27, the net capital inflow of the ETH spot ETF was about $240 million, while the net inflow of the BTC spot ETF reached $30.384 billion, a huge difference.
As for the reason, ETH is at a disadvantage compared to BTC in terms of value stability and positioning, and its core staking function has been rejected and restricted by the SEC, further diluting investors' enthusiasm. From a cost perspective, 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 have to pay the issuer an additional management fee of 0.15% to 2.5%.
However, with the change in regulation, the ETH spot ETF may not necessarily lack Staking, as the SEC's previous firm rejection of Staking has changed, and there are precedents in Europe. Recently, European ETP issuer 21Shares AG announced that it will add Staking functionality to its core ETH ETP product.
Of course, while ETFs are good, the actual capital inflow situation remains to be verified, and even for ETH, its attractiveness to traditional capital is limited. The total assets of Grayscale's Solana Trust are only $70 million, and the investment purchasing power of Altcoins does not seem to be as optimistic as imagined. Affected by this, Robert Mitchnik, head of BlackRock's digital asset division, 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 this timely boost is just what the ailing Altcoin market needs.
