Bitcoin pulls back, and altcoin ETFs surge.

The bull market craze is still spreading. Although Bitcoin surged higher and fell back, Ethereum reversed its decline and exceeded US$3,600, ushering in many sectors such as Defi and Layer2. With the general rise, the altcoin market has finally begun to take on a new lease of life. But a few days ago, the situation was very different. At that time, Bitcoin was close to US$100,000, altcoins were wailing everywhere, and the market was struggling to survive.

Copycats are bleak, but Wall Street is thinking about it. With the unprecedented regulatory benefits, Wall Street has focused on altcoin ETFs, which has also given the long-dormant altcoin market a winter boost.

Just a week ago, Bitcoin continued to break through and hit $99,000, making headlines in major media, but the community, which has always been active, was rarely silent. In this round of bull market dominated by institutions, most market participants did not experience liquidity overflow. Instead, the altcoins they held were continuously sucked by Bitcoin, showing a downward trend. Compared with the vigorous bull market propaganda, participants were quite disappointed. There is a feeling of bitterness in the heart that is difficult to express.

A typical example is Ethereum. Compared with other altcoins, ETH is already recognized as a mainstream currency, but in terms of price trends, the relative growth is Far less than Bitcoin, the exchange rate between ETH and BTC continued to fall during the year, from 0.053 to a low of 0.032, and only began to rebound in recent days. This is true even for Ethereum, and even more so for other currencies.

But just recently, the silent altcoin market seems to have come alive. SoL, XRP, LTC and Link were the first to launch last weekend. Solana’s DEX average daily trading volume exceeded US$6 billion, and XRP soared to US$1.63. This morning, Ethereum rose strongly and exceeded US$3,600. The altcoin sector experienced general gains, and the Defi sector rose by 8.47% in 24 hours.

When it comes to the reasons for the rise of copycats, in addition to the emotional benefits brought by the bull market, Wall Street has contributed a lot, and ETFs are the most intuitive presentation.

Looking back at the beginning of this bull market, 11 Bitcoin spot ETFs sparked a craze, and the entry of Wall Street giants such as BlackRock and Fidelity promoted the mainstreaming of Bitcoin. It has also rapidly lowered the threshold for market participation in the encryption market. at that time, Bitcoin and Ethereum spot ETFs have been approved successively, and the market has different opinions on the next token that can make Wall Street excited. Due to market value and capital considerations, Solana was once the most popular currency.

On June 27, asset management giant VanEck took the lead and submitted the S-1 form for the "VanEck Solana Trust" to the SEC. The next day, 21Shares An S-1 application was filed shortly thereafter. On July 8, Cboe, the Chicago Board Options Exchange, officially submitted 19b-4 documents for VanEck and 21Shares’ Solana ETF, bringing this wave of SOL ETF speculation to a climax.

The good times did not last long, and the SEC’s tough attitude quickly cooled down altcoin ETFs. In August, market news reported that CBOE had removed the 19b-4 applications for two potential Solana ETFs from the "Pending Rules Change" page on its website, and analysts bluntly stated that there was "no hope of passing."

But now, the market is still there, but the situation is completely different. On November 22, Cboe BZX exchange documents 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 respectively and are classified as "Commodity-Based Trust Fund Shares" and filed in accordance with Rule 14.11(e)(4). If the SEC formally accepts the application, the final approval deadline is expected to be in early August 2025.

Not only Solana, more ETFs are also on the way. Just in the past month, the crypto investment company Canary Capital has submitted spot ETF applications for XRP, Litecoin, and HBAR to the U.S. SEC. According to ETF Store President Nate Geraci, at least one issuer is currently trying to apply for ADA (Cardano) or AVAX (Avalanche) ETFs.

The emergence of altcoin ETFs has aroused widespread heated discussion, and the inflow of funds from far away is even more Is the Wild West of crypto ETFs really coming to boil the market?

From an objective rule, looking back at the previous approval process of Bitcoin and Ethereum, it is basically necessary for cryptocurrency to be approved as a spot ETF.Two major implicit requirements must be met. One is that it has not been explicitly classified as a security by the Securities Regulatory Commission; the other is that 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) in the United States. ) trading, that is, going online to the futures market first. From this point of view, except for Bitcoin and Ethereum, there seems to be no one in the current encryption market that meets the standards. More centralized currency approval is even more difficult, especially for SOL. Not only is it highly centralized, it has also been explicitly listed as a security in the US SEC's accusation against Binance.

But despite this, the market is still positive about the ETF approval of SOL and XRP. Bloomberg ETF analyst James Seyffart, who is authoritative in the field of ETFs, believes that the decision-making 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 there is a high probability that the Solana ETF will be approved by the end of next year.

Behind the optimism, there is naturally information to support it, and the core factor points to the incoming President Trump. Trump’s commitment to encryption is being actively fulfilled, and changes in the internal and external regulatory environment have given the cryptocurrency industry stronger confidence.

From the perspective of industry supervision, the SEC, the main regulatory authority for cryptocurrency, is about to undergo a change. Current SEC Chairman Gary Gensler voluntarily abdicated and announced that he would resign on January 20, 2025, the day Trump officially took office, finally pressing the pause button on the SEC's strict supervision in recent years. According to statistics, during his tenure, Gensler took enforcement actions against Coinbase, Kraken, Robinhood, OpenSea, Uniswap, MetaMask and other entities. He completed thousands of enforcement cases and recovered approximately US$21 billion in fines. He is well-known in the industry. of crypto opponents.

Although the next SEC chairman has not yet been selected, people familiar with the matter said that former SEC member Paul Atkins may succeed Gary Gensler. At a time when the dispute over confidential currency securities and commodities is becoming increasingly fierce, there are also rumors that Trump hopes to expand the power of the Commodity Futures Trading Commission (CFTC) and strengthen its regulatory power in the field of digital assets. If this move is realized, the identification of security attributes of crypto assets may be weakened.

From the perspective of the broader external environment, Trump can be called a cryptocurrencyA gathering place for coin players. Among all Trump’s new cabinet ministers, in addition to names familiar to the market such as Musk and Howard Lutnick, Treasury Secretary Scott Bessent, Security Advisor Michael Waltz, Intelligence Director Tulsi Gabbard, Commerce Secretary Howard Lutnick, Five members including Secretary of Health and Human Services Robert Kennedy Jr. are encryption supporters, including Waltz, Lutnick, Gabbard actually holds cryptocurrency, and Lutnick is a super fan of Bitcoin. Not only does he hold hundreds of millions of dollars in Bitcoin, but his company Cantor Fitzgerald has provided custody services for Tether for many years.

Obviously, the composition of this term is completely different from the previous ones. Since the superstructure is mostly supporters, the supervision of cryptocurrency will inevitably show a loose trend. And if a comprehensive regulatory framework for crypto assets is established during this term, the direction of subsequent industry supervision will be clearer.

Besides supervision, Trump’s companies have targeted business opportunities earlier. Recently, it has taken frequent actions and is committed to broadening the territory of the encryption industry through investment and financing. According to market sources, Trump Media Technology Company is negotiating with Intercontinental Exchange (ICE) to acquire the cryptocurrency exchange Bakkt. Just a few days ago, Trump Media Technology Group submitted an application for a cryptocurrency payment service called Truth Fi, planning to get involved in the field of cryptocurrency payments. Corporate trends once again reflect the president’s positive attitude towards encryption.

It is based on the above factors that the market has rekindled hopes for altcoin ETFs. After all, with the end of the SEC chairman, the securities debate surrounding altcoins is expected to cease. , laying a preliminary foundation for the realization of ETF.

On the other hand, even if the direction of altcoin ETFs is unpredictable, Wall Street is unwilling to give up this huge market of more than 3 trillion, and traditional institutions are focusing on crypto assets Build new investment products and derivatives to make it easier for investors to incorporate crypto assets into their portfolios.

Sui Chung, who runs crypto index provider CF Benchmarks, said that mainstream investors will establish direct general exposure trends through spot Bitcoin ETFs, as well as through additional products to tailor exposure to asset classes. Among the most popular products include those involving commodity futures that are tied to cryptocurrencies and earn income, as well as those that offer downside protection through options. Currently, the company is planning to launch NasdaqBitcoin Index Options.

John Davi, chief investment officer of Astoria Portfolio Advisors, also mentioned that he is currently considering increasing Bitcoin exposure in the ETF model portfolio he runs.

Generally speaking, although the current wave of Shanzhai ETFs is still difficult to realize under the current regulatory background, from a long-term perspective, with the liberalization of regulations and investment With the increasing interest of investors, out of consideration of traffic acquisition and market competition, it will become an objective reality for institutions to conduct in-depth research on crypto assets. On the product side, institutions will no longer be limited to Bitcoin and Ethereum. The productization and standardization of crypto assets will be further strengthened. Derivatives may usher in a blowout, aiming to clear the barriers for investors to enter. It is foreseeable that investors will have more ways to invest in cryptocurrency-related products.

In addition to new products that are not yet available, existing ETFs will also benefit from this trend. Take the Ethereum spot ETF as an example. For a long time, the capital inflow of the Ethereum spot ETF has been weaker than that of Bitcoin. Based on data, as of November 27, the net inflow of Ethereum spot ETF funds was approximately US$240 million, while the Bitcoin spot ETF net inflows were as high as US$30.384 billion, a far cry from the two.

Discussing the reasons, Ethereum already has disadvantages compared with Bitcoin due to differences in value firmness and positioning, and its core staking function was rejected by the SEC. The restrictions have once again diluted investor enthusiasm. To explain in terms of cost, if investors directly hold ETH, they can obtain a pledge income of close to 3.5%. However, if they hold institutional ETFs, they will not only not be able to obtain this risk-free income, but they will also have to pay an additional 0.15 to 2.5% to the issuer. Management fee.

However, with the change of supervision, Ethereum spot ETF may not be irrelevant to staking. After all, the attitude of the SEC, which had previously firmly opposed staking, has changed, and there is also a precedent for its launch in Europe. European ETP issuer 21Shares AG recently announced the addition of staking functionality to its Ethereum core ETP product.

Of course, although ETFs are good, the actual capital inflow needs to be examined. Even Ethereum’s appeal to traditional capital is very limited. Grayscale’s Solana Trust has total assets of only US$70 million. The investment purchasing power of altcoins does not seem to be as optimistic as expected. Affected by this, Robert Mitchnik, head of BlackRock's digital asset department, once mentioned that the company has little interest in other encryption products other than Bitcoin and Ethereum.

However, no matter how the subsequent approval progresses, the hype around Shanzhai ETFs has already begun. For the long-suffering Shanzhai market, this shot in the arm comes too timely.