Wall Street veterans: They are also starting to copycat

Bitcoin Pulls Back, Altcoin ETFs Soar

The bull market is still spreading. Although Bitcoin has mixed gains and losses, Ethereum reversed its decline and broke through $3,700. Defi, Layer2 and other sectors generally rose, and the altcoin market finally began to rejuvenate. But a few days ago, the situation was very different. At that time, Bitcoin was close to $100,000, but altcoins were wailing everywhere, and the market was in a state of life and death.

The altcoin market is bleak, but Wall Street is eyeing it. Under the unprecedented regulatory benefits, Wall Street has set its sights on altcoin ETFs, which has also ignited the winter charcoal fire in the long-dormant altcoin market.

Just a week ago, Bitcoin continued to break through $99,000 and made headlines in major media, but the usually active community was unusually silent. In this round of institutional-led bull market, most market participants did not get liquidity overflow, but instead the altcoins they held were constantly absorbed by Bitcoin, showing a negative growth trend. Compared with the vigorous bull market propaganda, the participants were miserable.

A typical example is Ethereum. Compared with other altcoins, ETH is already a recognized mainstream currency, but judging from the price trend, its relative increase is far less than that of Bitcoin. The exchange rate between ETH and BTC has continued to fall this year, from 0.053 to 0.032, and has only recently begun to rebound. This is the case even for Ethereum, and even more so for other currencies.

Wall Street veterans also start to play altcoins

But recently, the dormant altcoin market seems to be active again. SoL, XRP, LTC and Link were the first to go online last weekend. Solana's DEX daily trading volume exceeded 6 billion US dollars, and XRP soared to 1.63 US dollars. This morning, Ethereum rose strongly to break through 3,600 US dollars. The altcoin sector ushered in a general rise, and the Defi sector rose 8.47% in 24 hours.

When it comes to the reasons for the rise of altcoins, in addition to the positive sentiment brought by the bull market, the contribution of Wall Street is indispensable, and ETF is the most intuitive presentation.

Back at the beginning of this bull market, 11 Bitcoin spot ETFs set off a craze. The entry of Wall Street giants such as BlackRock and Fidelity promoted the mainstreaming of Bitcoin and quickly lowered the threshold for participation in the crypto market. At that time, Bitcoin and Ethereum spot ETFs were approved one after another, and the market had different opinions on the next token that would excite Wall Street. Due to market value and funding considerations, Solana was once the most popular currency.

On June 27, asset management giant VanEck took the lead in submitting the S-1 form for "VanEck Solana Trust" to the SEC. The next day, 21Shares followed suit and submitted an S-1 application. On July 8, the Chicago Board Options Exchange Cboe formally submitted the 19b-4 documents for VanEck and 21Shares' Solana ETF, pushing this wave of SOL ETF hype to a climax.

The good times didn’t last long, as the SEC’s tough stance quickly cooled the market for this altcoin ETF. In August, market news said that CBOE had removed the 19b-4 applications for two potential Solana ETFs from the “pending rule changes” page on its website, and analysts bluntly stated that “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 documents showed that the exchange intends to list and trade four Solana-related ETFs on its platform. These ETFs were initiated by Bitwise, VanEck, 21Shares and Canary Funds, respectively, and are classified as "commodity-based trust fund shares" and submitted in accordance with Rule 14.11(e)(4). If the SEC formally accepts it, the final approval deadline is expected to be early August 2025.

Not only Solana, but more ETFs are on the way. In the past month, crypto investment company Canary Capital submitted spot ETF applications for three currencies, including XRP, Litecoin, and HBAR, to the US SEC. According to Nate Geraci, president of ETF Store, at least one issuer is currently trying to apply for ADA (Cardano) or AVAX (Avalanche) ETF.

Wall Street veterans are also starting to play with altcoins

The emergence of altcoin ETFs has sparked widespread discussion, and the inflow of funds from afar has made the market boil. Is the Wild West of crypto ETFs really here?

Objectively speaking, looking back at the approval process of Bitcoin and Ethereum, cryptocurrencies need to meet two implicit requirements to be approved for spot ETFs. One is that they have not been clearly identified as securities by the China 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, that is, the first launch of the futures market. From this perspective, apart from Bitcoin and Ethereum, the current crypto market does not seem to have a standard. It is even more difficult for more centralized currencies to be approved, especially SOL, which is not only highly centralized, but also clearly listed as a security in the US SEC's allegations against Binance.

However, despite this, the market is still positive about the approval of SOL and XRP ETFs. James Seyffart, an authoritative ETF analyst at Bloomberg, believes that the decision-making 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. Nate Geraci, president of ETF Store, is more optimistic, saying that Solana ETF is very likely to be approved by the end of next year.

There is naturally information to support the optimism, and the core factor points to the incoming President Trump. Trump's promises on encryption are being actively fulfilled, and changes in the internal and external regulatory environment have given the cryptocurrency industry more confidence.

In terms of industry regulation, the SEC, as the main regulatory department for cryptocurrencies, is about to undergo a major reshuffle. On January 20, 2025, the day Trump officially took office, the current SEC Chairman Gary Gensler took the initiative to resign and announced his resignation, finally pressing the pause button for the SEC's strict regulation in recent years. According to statistics, during his tenure, Gensler took enforcement actions against multiple entities including Coinbase, Kraken, Robinhood, OpenSea, Uniswap, MetaMask, etc., completed thousands of enforcement cases in total, recovered about $21 billion in fines, and became a well-known crypto opponent in the industry.

Although the next SEC chairman has not yet been selected, people familiar with the matter said that former SEC Commissioner Paul Atkins may take over Gary Gensler's position. As the battle over cryptocurrency securities intensifies, there are also rumors that the Trump administration wants 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 securities attributes of crypto assets may be weakened.

From a broader external environment, the Trump administration can be regarded as a gathering place for cryptocurrency players. Among all the cabinet ministers of the new Trump administration, in addition to well-known names in the market such as Musk and Howard Lutnick, five members including Treasury Secretary Scott Bessant, National Security Advisor Michael Waltz, Director of National Intelligence Tulsi Gabbard, Commerce Secretary Howard Lutnick, and Secretary of Health and Human Services 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 does he hold hundreds of millions of dollars in Bitcoin, his company Cantor Fitzgerald has also provided custody services for Tether for many years.

It is clear that the composition of this government is completely different from the previous one. Since the superstructure is mostly supportive, the regulation of cryptocurrencies will inevitably be relaxed. If a comprehensive regulatory framework for crypto assets is established during this government's term, the subsequent industry regulatory direction will be clearer.

In addition to regulation, Trump's companies have already targeted business opportunities and have recently been active in expanding the crypto industry through investment and financing. Market sources said that Trump Media Technology is negotiating with the Intercontinental Exchange (ICE) to discuss the proposed acquisition of the cryptocurrency exchange Bakkt. Just recently, Trump Media Technology Group submitted an application for a cryptocurrency 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.

It is based on the above factors that the market has rekindled hope for altcoin ETFs. After all, with the resignation of the SEC chairman, the securities debate surrounding altcoins is expected to end.

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. Traditional institutions are building new investment products and derivatives around crypto assets to facilitate investors to include crypto assets in their asset portfolios.

Sui Chung, who runs crypto index provider CF Benchmarks, said mainstream investors will establish a direct general exposure trend through spot Bitcoin ETFs, and will also customize their exposure to the asset class through add-on products. Among them, the most popular products include products involving commodity futures that are linked to cryptocurrencies and earn returns, and products that provide downside protection through options. Currently, the company is planning to launch Nasdaq Bitcoin Index options.

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

In general, although the altcoin ETF craze is still difficult to achieve under the current regulatory background, in the long run, with the relaxation of regulation and the increase in investor interest, it will become an objective reality for institutions to conduct in-depth research on crypto assets for traffic acquisition and market competition. 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, and derivatives may usher in a blowout, aiming to clear obstacles 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 new products that have not yet been launched, existing ETFs will also benefit from this trend. Take Ethereum spot ETF as an example. The capital inflow of Ethereum spot ETF has long been weaker than that of Bitcoin. Data shows that as of November 27, the net inflow of Ethereum spot ETF funds was about 240 million US dollars, while the net inflow of Bitcoin spot ETF was as high as 30.384 billion US dollars, which is a far cry from the previous day.

As for the reason, Ethereum is at a disadvantage compared to Bitcoin due to its value firmness and positioning differences, and its core staking function was rejected and restricted by the SEC, which further diluted investors' enthusiasm. From a cost perspective, if investors directly hold ETH, they can obtain nearly 3.5% of staking income, but if they hold institutional ETFs, not only can they not obtain this risk-free income, but they also have to pay an additional management fee of 0.15% to 2.5% to the issuer.

However, with the change in regulation, Ethereum spot ETFs may not be free of staking. After all, the SEC, which previously firmly rejected staking, has changed its attitude, and there are precedents in Europe. Recently, European ETP issuer 21Shares AG announced that it will add staking functions to its Ethereum core ETP product.

Of course, although ETFs are good, the actual inflow of funds remains to be verified. Even Ethereum has limited appeal to traditional capital. Grayscale's Solana Trust has total assets of only $70 million, and the investment purchasing power of altcoins does not seem as optimistic as imagined. Affected by this, Robert Mitchnik, head of BlackRock's digital asset department, once mentioned that the company is not very interested in other crypto products besides Bitcoin and Ethereum.

But no matter how the subsequent approval progresses, the hype surrounding the copycat ETF has already begun. For the long-sick copycat market, this shot in the arm comes too timely.