After enduring a downturn in the market, which felt like a cold shower, the cryptocurrency industry has finally received a shot in the arm. On March 2, local time in the United States, Trump took to social media to express, "Following years of suppression by the Biden administration, the United States' cryptocurrency reserves will enhance the position of this key industry. That's why my digital asset executive order instructs the President's Working Group to advance a cryptocurrency strategic reserve including XRP, SOL, and ADA. I will ensure the United States becomes the world's cryptocurrency capital. We are making America great again! I also like Bitcoin and Ethereum!"

Trump's "pump" effect was immediately apparent, with BTC and ETH both surging over 10%, SOL skyrocketing over 20%, ADA rising over 70% to become the eighth largest cryptocurrency by market capitalization, and XRP's circulating market cap surpassing Ethereum's for the first time. The overall crypto market cap rebounded by 9% to $3.25 trillion.

With Trump's announcement of the "U.S. Cryptocurrency Strategic Reserve" plan, the most crypto-friendly U.S. Congress in history has emerged. Serving as a channel for traditional funds into the crypto ecosystem, the SEC's stance on crypto assets has shifted from "strong regulation" to "crypto-friendly." Last month, the SEC successively greenlit applications from several U.S. traditional giants for ETFs related to LTC, DOGE, SOL, and XRP. According to analysts James Seyffart and Eric Balchunas from Bloomberg, the market currently perceives a relatively high likelihood of approval for LTC, DOGE, SOL, and XRP spot ETFs. Market expectations for the launch of ETFs for other mainstream crypto assets on the U.S. capital market have significantly increased.

Read more: "Quick Look at Latest Developments of Multiple Crypto ETFs: SEC Review Speeds Up, SOL and LTC Ahead"

SEC's Latest Confirmation of ETF Application for Altcoin

Looking back at the development of crypto ETFs, this process has been full of twists and turns. After at least 30 rejections of Bitcoin spot ETF applications over the past 10 years, the market finally welcomed the formal approval and listing of a US Bitcoin spot ETF on January 11, 2024. On July 23 of the same year, the crypto market once again witnessed a historic moment as the SEC (U.S. Securities and Exchange Commission) formally approved an Ethereum spot ETF. 2024 can be seen as the year of crypto ETFs, with Bitcoin and Ethereum being the only two confirmed crypto ETFs so far.

From this perspective, the highly positive news last week was indeed rare, sending out an important positive signal to the entire crypto market. If these ETFs are ultimately approved, they will bring significant potential opportunities to the underlying assets and the entire cryptocurrency market. Investors will be able to enter the market more easily, driving a significant inflow of funds and thus improving market depth and stability.

Below is the analysis of the SEC's latest confirmation of an ETF application for an altcoin, covering the expected approval probability, regulatory compliance assessment basis, application progress, and market performance data in the last 30 days, sorted from high to low based on Bloomberg analysts' predictions of regulatory approval rates.

LTC (Litecoin)

ETF Approval Probability: 90%, considered by the SEC as a Bitcoin clone with decentralized characteristics, and is likely to be classified as a commodity. It is currently the most advanced altcoin in terms of approval progress.

Currently, Grayscale and Canary Capital have submitted LTC spot ETF applications, both of which have been accepted by the SEC. Bloomberg analyst Eric Balchunas believes that Litecoin will be the next crypto spot ETF approved by the SEC.

DOGE (Dogecoin)

ETF Approval Probability: 75%, considered by the SEC to be a clone of Bitcoin and Litecoin, with a high probability of being classified as a commodity.

Currently, there are 2 institutions that have submitted applications for a DOGE spot ETF, namely Grayscale and Rex, both of which have been accepted by the SEC.

SOL (Solana)

ETF Approval Probability: 70%, currently still considered a security by the SEC.

Currently, 5 issuers have submitted applications for a spot Solana ETF, namely Grayscale, Bitwise, VanEck, 21Shares, and Canary Capital, all of which have been accepted by the SEC. This marks the first time the SEC has acknowledged an ETF application for a token that was previously referred to as a "security."

XRP (Ripple)

ETF Approval Probability: 65%, primarily impacted by SEC lawsuits and needing to resolve regulatory disputes.

Currently, applicants including Grayscale, Bitwise, Canary Capital, 21Shares, and Wisdomtree have applied for an XRP spot ETF. Perhaps due to the impact of the previous lawsuits, only Grayscale's application has been accepted by the SEC.

Related Reading: "A Quick Look at the Latest Developments of Multiple Crypto ETFs: SEC Review Accelerates, SOL and LTC Making Progress"

After Ethereum ETF Approval, How Is It Performing Now?

The Ethereum ETF officially entered the U.S. capital market on July 23 of last year, with Ethereum's price around $3200 on that day. Market data shows that the net inflow of the Ethereum ETF in the past six months amounts to $2.82 billion, equivalent to Wall Street purchasing nearly 1% of Ethereum's volume, while Ethereum's price has now dropped to around $2500.

This is partly because Grayscale has been continuously selling off the Ethereum ETF, becoming the market's largest seller, thus hindering Ethereum's rise; on the other hand, Ethereum is more severely affected by whale selling compared to Bitcoin, and currently, Ethereum is still absorbing the potential selling pressure from whales.

However, the good news is that the entity World Finance Liberty, associated with Trump, is continuously accumulating Ethereum.ETF net inflows and continuous buying by Trump-related entities indicate a positive attitude towards Ethereum by long-term investors in an increasingly open policy market environment.

By extension, if LTC, DOGE, SOL, XRP ETFs are approved in 2025, although ETFs in this category will become an inflow window for traditional funds, it does not mean that these tokens will experience a significant upward trend.

ETF 2.0 for Cryptocurrency Under the Trump Administration

Looking at the development history of the cryptocurrency ETF, it is not difficult to see the significant positive impact of Trump's return to the White House on the entire market this year. Bloomberg analyst Eric Balchunas pointed out that before Trump won the election, except for Litecoin, the approval probability of all other assets remained below 5%. It is expected that as applications enter the approval process, as the SEC's decision deadline approaches, the approval probability of cryptocurrency ETFs will continue to rise.

Related Reading: "Coinbase 2025 Outlook: More Cryptocurrency ETFs to Emerge; Stablecoins Still a 'Killer App'"

So the question is: Why has the process of cryptocurrency ETFs been so difficult before? This can be traced back to the SEC's categorization of cryptocurrency.

Cryptocurrency: Security or Commodity?

Back in 2014, the debate on whether cryptocurrency should be legally defined as a security had already begun.

Back in the day, the Ethereum network's sponsors funded the network's development by selling 60 million Ether before the network officially launched a year later. Similar to a traditional Initial Public Offering (IPO) of common stock, the Ether ICO raised a fundamental question: whether crypto assets fit the definition of a security under U.S. federal securities law.

Today, this question remains a crucial criterion in determining whether a cryptocurrency ETF can be approved by the SEC. Its answer not only determines how and if crypto assets can be sold to the public but also dictates whether we must hold and trade these crypto assets under the current rules and market structure established for securities over the past 80 years.

Central to this debate is the Howey Test, stemming from a 1946 U.S. Supreme Court ruling in the SEC v. Howey case. The Howey Company leased citrus groves, promising to manage the land and sell the fruit, with investors receiving profits. In this litigation, the SEC prevailed as the market regulator deemed these contracts to fall within the definition of a security.

Thus, the famous Howey Test was born, becoming a key standard in the U.S. securities law framework to determine whether a transaction constitutes an "investment contract." Its core logic revolves around four elements: first, investors must commit money or assets with monetary value (such as cash, cryptocurrency, or goods), known as the "Investment of Money"; second, these funds must be pooled into a "Common Enterprise," where investors' returns are closely tied to the success or failure of the project as a whole rather than operating independently; third, investors' primary motivation must be based on an "Expectation of Profit," seeking economic returns through investment rather than pure product or service use; and finally, the realization of profits must be "predominantly from the efforts of others," meaning investors do not directly partake in management but rely on third parties' decisions and operational activities (such as token value depending on the team's development rather than user mining). These four elements are interrelated, collectively forming the standard for determining whether an "investment contract" is considered a security. Particularly in the cryptocurrency field, if a project fails to circumvent these conditions, it may face legal risks of being deemed an unregistered security.

In the Howey Test, all four conditions mentioned above must simultaneously exist for a transaction to be classified as a security. This standard can be seen as a compliance guide for cryptocurrency: if a project wants to avoid being classified as a security, it must break at least one of these conditions, such as emphasizing decentralization or user-driven contributions.

In terms of actual precedents, the SEC has stated that Bitcoin and Ethereum are "sufficiently decentralized," therefore not meeting the fourth criterion, and are not securities. However, institutional sales of tokens like XRP have been deemed securities, while the XRP tokens circulating in the secondary market are considered commodities.

Currently, Bitcoin and Ethereum have been recognized as commodities. Litecoin's high probability of approval stems from its PoW model similarity to Bitcoin, and the Dogecoin protocol is a clone of the Litecoin protocol, which is itself a clone of the Bitcoin protocol, so it also has a high probability of being recognized as a commodity. The classification of Solana and XRP has not been conclusively determined, especially given the pending litigation 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 comprehensive set of criteria, you may want to explore some notable cases: "Why These Five Tokens Are Securities? SEC Provides Answers", "ConsenSys Counters SEC Point by Point, Why Ethereum Is Not a Security".

What Impact Does This Have on the Crypto Market?

Bloomberg analysts predict that the SEC will make a decision on proposed meme coin ETFs in October of this year. It is foreseeable that if meme coin ETFs are consecutively approved, various bullish news events will likely continue to attract more conservative and institutional investors, thereby changing the market's investor base. In this policy environment, the crypto market may experience increased liquidity, price surges, and changes in investor structure. Therefore, the approval of more ETF products will bring more funds into the crypto market, enhance market liquidity, and thus reduce price volatility.

In addition, due to regulatory arbitrage, the introduction of an ETF in the United States may directly trigger imitation in other countries and regions around the world. This imitation may to varying degrees drive the global adoption of cryptocurrency, especially in regions with more lenient regulations, where cryptocurrency adoption may experience even more rapid growth. Global policy convergence can not only effectively reduce the compliance costs of cross-border transactions but also further eliminate investors' concerns about legal risks, thereby promoting more institutional and individual participation. This trend may accelerate the transformation of cryptocurrency from a fringe asset to a mainstream financial instrument, pushing its status in the global economy to continue rising.

As the Trump administration further supports the crypto industry, U.S. states are gradually introducing 'Strategic Bitcoin Reserve' legislation, coupled with Republican control of both the Senate and the House of Representatives, Congress may have the opportunity to pass cryptocurrency-related bills. Once legislation is passed, cryptocurrency may have the opportunity to become a new type of asset class that is neither a security nor a commodity, which would be revolutionary for the crypto market.

Where Will Crypto ETFs Go This Year?

Below are predictions from industry institutions and KOLs on the development of crypto ETFs in 2025 (the original article is adapted from ChainCatcher, "2024 Crypto ETF Landscape: AUM Surpasses $120 Billion; Shifting from Edge to Mainstream"):

Forbes predicts that an Ethereum ETF may integrate staking for the first time, while spot ETFs for mainstream tokens like Solana are expected to accelerate, and weighted crypto index ETFs may emerge to cover a wider range of assets.

Research institution Messari emphasizes that with the positive flow of funds into Grayscale's GBTC, the launch of a Solana spot ETF in the next one to two years is "almost inevitable," and the overall inflow of funds into ETFs will continue to rise.

Coinbase, on the other hand, believes that while issuers may try to include more tokens like XRP, SOL, LTC, HBAR in the ETF asset scope, such expansions may only benefit a few tokens in practice.

The ETF issuer VanEck has put forward a more specific regulatory outlook, predicting that the new leadership of the U.S. SEC or CFTC will approve multiple spot cryptocurrency ETPs, including the VanEck Solana product. Additionally, the Ethereum ETP may enhance its utility through staking support, while both Bitcoin and Ethereum ETPs may adopt a physical creation/redemption mechanism. If the SEC's Rule SAB 121 is repealed, it will also drive deep involvement of traditional financial institutions in cryptocurrency custody.

Another issuer, Bitwise, holds a positive view on a Bitcoin ETF, expecting that by 2025, its inflows will surpass those of 2024, attracting institutional funds worth trillions of dollars.

Overall, various institutions predict a significant development for cryptocurrency ETFs in 2025. The diversification and innovation of ETF products, regulatory adjustments, and mainstream fund inflows will be the core driving forces of the cryptocurrency market in the next two years.

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