Wall Street Boomers are also starting to play with shitcoins

Original Title: "Wall Street Institutions Set Their Sights on the Altcoin Market"

Original Source: Gyro Finance

Bitcoin correction, Altcoin ETF surge.

As the bull market frenzy continues to spread, despite Bitcoin's surge and retracement, Ethereum has broken through $3600, and various sectors such as Defi and Layer2 have seen a general rise. The altcoin market is finally beginning to show signs of revitalization. However, just a few days ago, the situation was quite different, with Bitcoin approaching $100,000 while altcoins were struggling, showing a scene of survival.

While the altcoins were languishing, Wall Street had other ideas. With unprecedented regulatory optimism, Wall Street set its sights on Altcoin ETFs, bringing a winter bonfire to the long-dormant altcoin market.

Just a week ago, Bitcoin continued to surge, hitting $99,000 and making headlines in major media outlets. However, the usually active community remained unusually silent. In this round of institutionally-led bull market, most market participants did not experience liquidity overflow. Instead, holders of altcoins were continuously drained by Bitcoin, showing a downward trend. In contrast to the vigorous bull market promotion, participants felt bitter about their holdings.

A typical example is Ethereum. Compared to other altcoins, ETH is already recognized as a mainstream cryptocurrency. However, in terms of price trend, its relative increase is far less than that of Bitcoin. The exchange rate between ETH and BTC has been steadily declining during the year, from 0.053 to a low of 0.032 until a recent rebound. If even Ethereum is in this situation, other coins are even worse off.

But in recent days, the dormant altcoin market seems to have come alive. Coins such as Solana, XRP, LTC, and Link took off last weekend, with Solana's DEX daily trading volume exceeding $60 billion and XRP surging to $1.63. This morning, Ethereum surged past $3600, leading to a general rise in altcoins, with the Defi sector up 8.47% in the last 24 hours.

Regarding the reasons for the altcoin surge, in addition to the emotional boost brought by the bull market, Wall Street's role cannot be underestimated, with the ETF being the most direct representation.

Looking back at the beginning of this bull market, the 11 Bitcoin spot ETFs ignited a frenzy. The participation of Wall Street giants such as BlackRock and Fidelity promoted the mainstreaming of Bitcoin and rapidly reduced the market participation threshold for the crypto market. At that time, Bitcoin and Ethereum spot ETFs were successively approved, and the market had diverse opinions on the next viable token to catch Wall Street's interest. Due to market cap and capital considerations, Solana was once the most sought-after coin.

On June 27, asset management giant VanEck took the lead by submitting an S-1 form to the SEC for the "VanEck Solana Trust." The next day, 21Shares quickly followed suit with its own S-1 application. On July 8, the Chicago Board Options Exchange (Cboe) officially filed a 19b-4 form for the Solana ETFs from VanEck and 21Shares, bringing the SOL ETF frenzy to a climax.

However, the good times didn't last long as the SEC's tough stance quickly cooled off the meme coin ETF excitement. In August, market news indicated that Cboe had removed the 19b-4 applications for the two potential Solana ETFs from its website's "Pending Rule Changes" page, with analysts bluntly stating that the outcome was "hopeless."

Fast forward to the present day, the market remains, but the landscape has changed significantly. On November 22, documents from the Cboe BZX exchange revealed that the exchange proposed listing and trading four Solana-related ETFs on its platform. The ETFs, initiated by Bitwise, VanEck, 21Shares, and Canary Funds, are classified as "Commodity-Based Trust Shares" and were submitted in accordance with Rule 14.11(e)(4). If formally accepted by the SEC, the final approval deadline is expected to be in early August 2025.

It's not just Solana; more ETFs are on the way. In the past month alone, cryptocurrency investment firm Canary Capital has submitted applications to the U.S. SEC for spot ETFs for three currencies: XRP, Litecoin, and HBAR. And according to Nate Geraci, President of ETF Store, at least one issuer is currently attempting to file an ETF application for ADA (Cardano) or AVAX (Avalanche).

The emergence of meme coin ETFs has sparked widespread discussion, and the influx of funds from afar has made the market buzz with excitement. Is the wild west of crypto ETFs really upon us?

From an objective standpoint, looking back at the approval process for Bitcoin and Ethereum, approval for a cryptocurrency spot ETF generally requires meeting two key implicit requirements. First, the cryptocurrency must not have been explicitly classified as a security by the SEC. Second, there must be a leading indicator proving market stability and non-manipulability, typically exemplified by the token being tradable on the Chicago Mercantile Exchange (CME) in the U.S., thus first appearing on the futures market. In this regard, besides Bitcoin and Ethereum, the current cryptocurrency market seems to have no contenders meeting the criteria. Approval for more centralized coins is even more challenging, especially for SOL, which not only exhibits high centralization but was also explicitly labeled as a security in the SEC's charges against Binance.

However, despite this, the market remains optimistic about the approval of SOL and XRP ETFs. James Seyffart, a respected ETF analyst at Bloomberg, believes that the decision timeline for SOL, XRP, LTC, and HBAR ETFs may extend until the end of 2025, with the SEC possibly approving an ETF related to Solana within two years. Nate Geraci, President of ETF Store, is even more optimistic, stating that a Solana ETF is likely to be approved by the end of next year.

Behind this optimism lies supporting information, with the key factor pointing to the incoming President Trump. Trump's commitment to crypto is actively being fulfilled, and the changing regulatory environment both internally and externally has given the cryptocurrency industry greater confidence.

In terms of industry regulation, the primary regulatory body for cryptocurrencies, the SEC, is about to undergo a leadership change. The current SEC Chairman, Gary Gensler, has announced his automatic resignation, stating that he will step down on January 20, 2025, the day Trump officially takes office, finally pressing the pause button on the SEC's stringent regulation in recent years. During his tenure, Gensler took enforcement actions against several entities such as Coinbase, Kraken, Robinhood, OpenSea, Uniswap, MetaMask, completing thousands of enforcement actions and collecting fines totaling around $21 billion, making him a well-known crypto opponent in the industry.

Although the next SEC Chairman has not been selected, sources suggest that former SEC Commissioner Paul Atkins may take over Gary Gensler's position. At a time when the debate over cryptocurrency securities is intensifying, there are also rumors that the Trump administration hopes to expand the powers of the Commodity Futures Trading Commission (CFTC) to strengthen its regulatory authority in the digital asset space. If this move materializes, the classification of crypto assets as securities may be weakened.

Looking at the broader external environment, the Trump administration can be seen as a gathering place for cryptocurrency players. Among all cabinet ministerial nominations in the new Trump administration, besides market-known names like Musk and Howard Lutnick, five members — 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. Waltz, Lutnick, and Gabbard all hold cryptocurrency, with Lutnick being a huge Bitcoin fan, holding hundreds of millions of dollars worth of Bitcoin and his company Cantor Fitzgerald having provided custody services to Tether for many years.

It is obvious that the composition of the current government is very different from before, as the majority of the leadership are supporters, so cryptocurrency regulation is expected to take a more lenient approach. If a comprehensive regulatory framework for crypto assets is established during this government's term, the subsequent industry regulatory direction will also become clearer.

Outside of regulation, Trump-affiliated businesses have been quick to seize opportunities. Most recently, there has been a flurry of activity aimed at expanding the cryptocurrency industry through investment and financing. Market sources indicate that a Trump media technology company is in negotiations with the Intercontinental Exchange (ICE) regarding the potential acquisition of the cryptocurrency exchange Bakkt. Just recently, the Trump Media & Technology Group submitted an application for a cryptocurrency payment service named Truth Fi, with plans to enter the cryptocurrency payment field. Once again, the business moves indirectly reflect the president's positive attitude towards cryptocurrency.

It is precisely due to these factors that the market is once again hopeful for a Shitcoin ETF, as with the conclusion of the SEC chairman's term, the securities narrative surrounding shitcoins is expected to halt, laying the initial groundwork for an ETF.

On the other hand, even if the Shitcoin ETF path is unpredictable, Wall Street is not willing to give up on this massive market exceeding $3 trillion. Traditional institutions are building new investment products and derivative tools around crypto assets, allowing investors to easily incorporate crypto assets into their portfolios.

Sui Chung, who runs the cryptocurrency benchmark provider CF Benchmarks, stated that mainstream investors would establish direct plain exposure trends through a spot Bitcoin ETF and also customize exposure to asset classes through additional products. The most popular products include commodity futures products linked to cryptocurrency and earning returns, as well as products that provide downside protection through options. The company is currently planning to launch Nasdaq Bitcoin 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 portfolios he operates.

Overall, although the current Shitcoin ETF craze faces difficulties in realization under the current regulatory background, from a long-term perspective, with the relaxation of regulations and the increasing interest of investors, institutional in-depth research on cryptocurrency assets will become an objective reality. On the product side, institutions will no longer be limited to Bitcoin and Ethereum, and the productization and standardization of crypto assets will be further strengthened, possibly leading to a surge in derivatives designed to flatten barriers for investor entry. It can be foreseen that investors will have more ways to invest in cryptocurrency-related products.

Apart from the upcoming new products, existing ETFs will also benefit from this trend. Taking the Ethereum spot ETF as an example, historically, the inflow of funds into the Ethereum spot ETF has been weaker than that of Bitcoin. As of November 27, the net inflow of funds into the Ethereum spot ETF was approximately $240 million, while the net inflow into the Bitcoin spot ETF was as high as $30.384 billion, a stark difference between the two.

As for the reasons, Ethereum has always had a disadvantage compared to Bitcoin due to its robustness of value and positioning differences. Moreover, the most core staking feature being restricted by the SEC once again diluted investors' enthusiasm. In terms of costs, if an investor holds ETH directly, they can earn close to a 3.5% staking reward. However, if they hold an institutional ETF, not only do they not receive this risk-free reward, but they also have to pay the issuer an additional management fee ranging from 0.15% to 2.5%.

But with regulatory changes, the Ethereum spot ETF may not be devoid of staking. After all, the SEC's firm stance against staking has changed, and there are precedents in Europe. Recently, European ETP issuer 21Shares AG announced that it would add staking functionality to its Ethereum Core ETP product.

Of course, while ETFs are good, actual fund inflows need to be examined. Even Ethereum's attractiveness to traditional capital is very limited. The total assets of the Solana Trust under Grayscale are only $70 million, indicating that the investment purchasing power of altcoins may not be as optimistic as imagined. In light of this, Robert Mitchnik, Head of BlackRock's Digital Assets department, has mentioned that the company is not very interested in cryptocurrencies other than Bitcoin and Ethereum.

But regardless of how the subsequent approvals progress, the speculation surrounding altcoin ETFs has already begun. For the ailing altcoin market, this morale boost came just in time.

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