“Creators Speak” is a dialogue column created by Foresight News, where we interview outstanding creators selected each month on hot market topics and compile the results into articles, drawing on public opinion to explore deeper thoughts.
Authored by: Foresight News May 2024 Outstanding Content Creators
Compiled by: Foresight News
On May 23, local time in the United States, the SEC approved the 19b-4 form for 8 Ethereum spot ETFs, marking another milestone event for the crypto industry this year following the approval of the Bitcoin spot ETF. The softening of regulatory attitudes is undoubtedly an important catalyst for this round of bull market, but the market’s response has been unexpected. Can this good news enable Ethereum to take the lead and lead the bull market towards prosperity?
The theme of this issue of “Creators Speak” is “Spot ETH ETF Approved, Can Ethereum Lead the Bull Market?” We have invited the creators listed in the Foresight News May 2024 Outstanding Creators list, including LD Capital, Web3 Xiao Lu, Eureka Partners, Block Unicorn, Inpower Wang Jun, Manqun Blockchain Legal Services, Xiao Zhu Web3, Tom Analysis, and LFG Labs to join the discussion.
Around the topic of “ETH ETF,” we raised five questions: “Why did the US SEC suddenly change its attitude?” “Why is the market reaction to this positive news far less than that of the BTC ETF?” “What impact will the recent controversies of the Ethereum Foundation have?” “Which ecosystems will benefit from this?” and “Recent investment strategies.” Here are the answers we collected:
1. Spot ETH ETF approved, the sudden change in attitude of the US SEC, what do you think is the reason? What impact does this have on the crypto industry from a regulatory perspective?
LD Capital: Regulators and politicians are unpredictable. From the ETH CME holdings, which increased significantly from 22.59 thousand coins on May 20 to 31.9 thousand coins on June 6, there was a short time span for the substantial increase in holdings, indicating that institutions were not actively betting on the ETH ETF before. Therefore, the SEC’s sudden change is influenced by political factors, and the passing of the FIT21 bill (mainly establishing a system to regulate the US crypto market, setting consumer protection measures, designating the Commodity Futures Trading Commission (CFTC) as the main regulatory body for digital assets and the regulator of non-securities spot markets) by the House of Representatives also shows a signal of loosening crypto regulations in this stage. However, although this bill still needs to pass the Senate, presidential action, etc., and on June 3, Biden vetoed the vote on SAB121, so there is a significant possibility that the FIT21 bill will be overturned in the upcoming process. Political games before the elections will continue to have a turning point on the future of the crypto market. But from a regulatory perspective, the approval of the ETH ETF helps to lift the long-standing cloud of security uncertainty for ETH and is positive for most tokens that previously had vague security definitions.
Web3 Xiao Lu: The reasons behind the push for the BTC ETF earlier this year were: 1) Garyscale Grayscale’s successful lawsuit, pressure from the courts; 2) BTC’s non-security nature; 3) BTC’s regulation in futures; 4) Traditional financial institutions such as Blackrock’s push.
Therefore, SEC Chairman Gary Gensler reluctantly voted in favor of the BTC ETF.
Similarly, reasoning to the ETH ETF, ETH may be identified as a security, and we have also seen the SEC investigating the Ethereum Foundation. And the SEC has exerted regulatory pressure on various platforms like Uniswap and Robinhood through various Wells Notices.
The real change is the political shift in the United States, 1) the push for the US presidential election (15% of the US population are crypto holders); 2) Trump’s Pro Crypto style, and 3) the support from traditional financial institutions.
The approval of the ETH ETF will have far-reaching implications for the crypto market, marking mainstream recognition of crypto assets (possibly more in terms of investment and asset allocation), and further exploring the transformation of traditional finance by mainstream financial institutions (realization of Blackrock tokenized funds, DTCC exploring the possibility of tokenized securities settlement on the blockchain, and the use of blockchain payment settlement for cross-border payments).
Eureka Partners: The recent quietness of the crypto market has shifted users’ attention to the macro market. For ETH, its biggest controversy is whether ETH belongs to commodities or securities, an issue that the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been debating. The day before the approval of the ETH ETF, the FIT21 bill was passed, which classifies ETH as a commodity, making the approval of the ETH ETF very clear.
From a regulatory perspective, the approval of the ETH ETF means that the US has reached a consensus on ETH, that ETH not used for staking belongs to commodities, and that ETH used for staking belongs to securities. This will make the subsequent policy impacts in the US clearer.
Block Unicorn: First of all, this shift is a consensus reached by the Democratic and Republican parties in the United States, confirming that cryptocurrencies can benefit the US government and accelerating the approval process by the SEC. Secondly, both Democrats and Republicans have used cryptocurrencies as donations for presidential elections, which is an important move in the history of cryptocurrencies and will attract more people to join this industry in the future. Presidential elections can indirectly influence billions of people worldwide, and attracting 50 million new people to this industry will have a significant impact on the industry’s dynamics.
Inpower Wang Jun: I personally think the main reason is to attract crypto voters. Currently, most of the SEC’s top officials are from the Democratic Party, but they have adopted a conservative strategy when it comes to crypto policies.
It is said that there are 50 million crypto users in the United States, and Trump is actively trying to attract this group of voters.
In this context, the Democratic Party should also take proactive measures and not give up this part of the vote.
Manqun Blockchain Legal Services: If you can’t beat them, join them. According to statistics, there are over 50 million crypto asset users in the United States, and the regulatory layer, including the SEC, should understand that this trend is unstoppable. In comparison with other governments, it is better for the US to embrace this trend. From a regulatory perspective, this move whitewashes mainstream virtual currency projects and also serves as a wake-up call for other blockchain projects, showing that projects can issue tokens but should reduce compliance costs.
Xiao Zhu Web3: Firstly, I believe the approval of the ETH ETF was only a matter of time. ETH has always been a representative of Blockchain 2.0, with enough consensus in the industry. Secondly, regarding the sudden change in attitude of the US SEC, I think there are political reasons (not explained in detail here), as well as the previous approval of the Bitcoin ETF. The approval of the Bitcoin ETF undoubtedly involved a detailed investigation of the entire crypto market. There is an old saying, “Consensus is value.” The consensus on BTC/ETH is solid, and apart from BTC/ETH/stablecoins, other cryptocurrencies are considered altcoins. ETH has been running for nearly a decade without major issues and has incubated revolutionary products like DeFi, expanding the crypto market. Therefore, the sudden change in the SEC’s attitude may be an acknowledgment of ETH’s position in the crypto market. Lastly, from a regulatory perspective, this is good news for the crypto industry, a signal of mainstream market acceptance. We can also see that Hong Kong is easing regulations and has already launched an ETH ETF, but currently, only BTC/ETH are benefiting. Some people say this is a round of ETF bull run, with no significant impact on altcoins. However, I believe that other cryptocurrencies will benefit in the future, but it will take some time for them to gain mainstream market acceptance.
Tom Analysis: The spot Ethereum ETF was listed in Hong Kong in April, and the US Ethereum ETF 19b-4 document was quickly approved, indicating top-level promotion behind the scenes, demonstrating the global geopolitical competition and the battle for the hearts and minds of crypto users within each region. Particularly as the US presidential election heats up, the Republican Party has always been more friendly towards the crypto industry, with Trump openly accepting crypto donations. The young cryptocurrency supporter group is also a crucial voting base that the Democratic Party needs to attract. From this perspective, the sudden change in attitude of the US SEC can also be understood.
From a more macro and long-term perspective, the US financial regulatory system has strong global reference significance, and Hong Kong, as a testing ground for mainland China, can also influence the financial landscape in the Chinese-speaking regions. The rapid approval of the Ethereum ETF in the US and Hong Kong recommends a further step towards the legitimization of cryptocurrencies in the global financial system, and will continue to drive crypto assets into mainstream investor portfolios, a long-term positive development.
LFG Labs: An election year is definitely a key factor. For the United States, the group directly or indirectly holding cryptocurrencies is already a force that cannot be ignored, especially when the poll data is tight, the “key few” are a sought-after group. The easing at the administrative and legislative levels has prompted a shift in the regulatory landscape, and regardless of the actual outcome, this is a turning point for crypto assets to enter the mainstream vision and gain a legal and compliant framework.
2. Why is the market’s response to the ETH ETF positive news far less than that of the previous BTC ETF, and do you think the main theme of this bull market will return to Ethereum?
LD Capital: Traditional institutions have a higher level of familiarity and acceptance of BTC, and surveys show that the net inflow of funds after the formal approval of the ETH ETF may be less than 20%-30% of BTC. ETH will become the main theme in the middle to later stages of the bull market. In the short term, BTC remains very strong, as indicated by the term structure of the options market and the forward exchange rate of ETH/BTC, which still suggests a stronger bullish sentiment towards BTC in the longer term (end of the year).
Web3 Xiao Lu: BTC and ETH have inherently different asset properties. Traditional capital can accept BTC as a tool for value storage but may not accept ETH for this purpose. Considering the relative market size of ETH and BTC and the differences in institutional demand for these assets, the flow of funds may be disappointing. For example, the popularity of the US ETH futures ETF in October 2023 may have set the tone.
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The translation is complete.The asset management scale of Hong Kong spot BTC ETF is about 239 million US dollars, while the asset management scale of ETH ETF is 41 million US dollars, with a ratio of about 6:1. The ratio of Canadian spot ETFs is similar, with BTC and ETH asset management scales of 2.7 billion Canadian dollars and 450 million Canadian dollars respectively.
Eureka Partners: The main reason lies in social consensus. The purpose of ETF is to allow more users from traditional industries to buy and sell BTC like stocks. For traditional industry users, the social consensus of BTC will be much stronger than that of ETH, as everyone’s market awareness of Crypto cannot ignore BTC.
We, Eureka Partners, believe that the bull market is actually a logic of a primary uptrend, meaning that the market narrative will show a cyclical change. Ethereum, as an ecosystem market with great potential even now, is bound to burst with a series of good projects and voices.
Block unicorn: Firstly, after the Bitcoin ETF was listed, everyone had no doubt that the Ethereum ETF would be listed. People in the industry had already bought Ethereum during the Bitcoin listing period, but this existing capital did not cause Ethereum’s price to rise. The news of the accelerated approval of the Ethereum ETF attracted unexpected new capital from the industry, causing the price of Ethereum to skyrocket.
Secondly, in the past or recently, because Ethereum did not rise to their satisfaction, a feeling of disgust started to emerge. I think this sentiment is mostly from small retail investors, while large investors surely have enough patience to wait for Ethereum. Currently, the financial infrastructure of our industry is almost monopolized by Ethereum. The logic of the entire world is that all economic activities in all industries are almost inseparable from banks. Ethereum has the industry’s most advanced financial infrastructure and innovation, so when ETH rises, it can benefit the entire industry, as its volume determines that Ethereum has such a powerful energy to drive the market.
inpower Wang Jun: It’s not bad, with an increase of about 20% due to this good news. The previous increase in the price of BTC was not entirely due to the ETF, but was caused by factors such as halving and the diverse ecology of Bitcoin.
The current ETH ETF has not been fully approved, and only half of the products will be launched after approval.
I personally think that the approval of the Ethereum ETF is more beneficial to the entire crypto market. For example, many people are now paying attention to the progress of Solana’s ETF.
As for the main theme of this issue, I personally think that mainstream capital is focusing on large-scale application scenarios that have high performance requirements.
To be honest, I feel that the gap between Solana and Ethereum is not that big now, which is related to the various fiefdoms of the Ethereum Layer2, and if they cannot unite, they may be overtaken by Solana.
Mankun Blockchain Legal Services: One goes up, the other goes down, and then it declines. This principle applies to virtual currency ETFs as well. Investors’ interest in the story of the integration of the lower reaches has diminished. This round of bull market will not return to Ethereum, as the story is old and lacks innovation. From the perspective of entrepreneurship, Ethereum is already a 10-year-old organization.
Xiaozhu Web3: First of all, if you remove the altcoins from the market, BTC ETF approval led to a surge in BTC, opening up a crypto bull market. Similarly, the approval of the ETH ETF led to a surge in ETH, reversing the ETH/BTC exchange rate. Since other altcoins did not benefit from the ETF news, it is reasonable that they did not rise. The lackluster response to the ETH ETF approval compared to the previous BTC ETF approval may be because the market had expectations after the BTC ETF approval, expecting a large influx of capital into the crypto market and causing many altcoins to rise several times. However, the funds only entered BTC, and many altcoins fell back to levels before the BTC ETF approval, so the lack of a significant response to the ETH ETF approval is considered normal. As for whether the main theme of this round of the bull market will return to Ethereum, I hope it will, but the current narrative of the ETF, whether it’s Layer2 or Restaking, lacks some practical applications, which are essential for a vibrant market.
Tom Analysis: The market’s response to the Ethereum ETF has been relatively small, mainly due to several reasons:
1) After the approval of the Bitcoin ETF, the market already implied the expectation of the approval of the Ethereum ETF. The price of Ethereum started at 1600 USD in October 23 and rose to around 2400 USD in early January 24, accompanied by Bitcoin breaking through 4000 USD, making the expectation of the Ethereum ETF an important driving force.
2) Currently, only the Hong Kong Ethereum ETF is officially listed for trading, but because mainland users cannot purchase it, there is a lack of incremental buying pressure, resulting in relatively small trading volume and market value scale. According to SoSo Value data, as of now, the Hong Kong Ethereum ETF has been listed for 25 trading days, with an average daily trading volume of only 1.43 million USD; the total locked ETH of only 14,000 coins for the Hong Kong Ethereum ETF, combined with the support for physical subscriptions, has not been able to replicate the path of the US Bitcoin Ethereum, bringing a significant amount of buying pressure to the chain.
3) Another small reason is that currently, both the Hong Kong Ethereum ETF and the expected US Ethereum ETF do not support staking rewards. For users who are capable of holding assets, holding ETFs has a lower annualized return rate of about 3 percentage points than holding assets directly.
LFG Labs: If we look at it from the perspective of “carving a boat to seek a sword,” the Bitcoin ETF gestation period from the beginning of the news to its final launch, combined with the rhythm of the market rising, took about half a year, so Ethereum may also be moving at this pace; of course, from a conspiratorial point of view, it is not ruled out that the market expectation (insider information) is unlikely to be approved this year.
I believe Ethereum is still the main axis of innovation in the Web3 ecosystem, but in terms of attracting incremental users and sharing profits equitably, other ecosystems in the current cycle have taken the lead, making Ethereum somewhat lonely.
3) Recently, the Ethereum Foundation has been controversial, with some believing that it has become a burden on the Ethereum ecosystem. This includes core developers making money on the side and Vitalik’s absolute influence, which may have an impact on Ethereum’s compliance path, entry of traditional institutions, and broader prospects.
LD Capital: The Foundation will still play an important role in the development of Ethereum, but from the perspective of the Foundation as a participant in ETH as a secondary asset, regular operational selling pressure, funding participation attributes caused by political alignment may lead to its suppression by competitors such as Solana.
Web3 Xiaolu: Relatively younger public chain foundations (more like startups) may be able to meet the high-growth needs of users, linking more of the price growth to the success or failure of the foundation’s governance. The Ethereum Foundation is a relatively long-running organization that cannot avoid governance issues on the path to decentralization (midlife crisis, growth bottleneck), which is a systemic engineering issue, including mechanisms’ transparency, terms, and the flow of rights.
Eureka Partners: Vitalik and the Ethereum Foundation have always been seen as relatively centralized points in the current Ethereum ecosystem, and they have a significant say in the future development trends of Ethereum. However, this is actually a necessary process. The existence of Vitalik and the Foundation is mainly due to the current imperfect infrastructure, like a child just learning to walk, we all need to put forward some good suggestions in the early stages to ensure that the development path does not deviate. Therefore, so far, Vitalik and the Foundation play more of a positive boosting role in the future compliance risks, entry of traditional institutions, and other broader prospects.
Block unicorn: Firstly, regarding the issue of the Ethereum Foundation coming out to make extra money, this is not unique to Ethereum. The people in the SOL Foundation used to praise a certain MEME coin every day, but no one criticized them.
Secondly, as Ethereum gradually decentralizes, most of the Foundation members will become less important, with only a few having an impact on the industry. After traditional institutions enter the scene, these foundations become less and less important, and traditional institutions will compete for dominance in the industry, gaining more benefits.
inpower Wang Jun: Personally, I believe that the influence of the Ethereum Foundation is no longer as absolute as before, including V God’s absolute influence is not as strong as it was a few years ago.
This is actually a good thing, as it is an experience of decentralization.
In the long run, whether Ethereum can maintain its current position depends on maintaining an advantage in the competition for application scenarios to land.
The Ethereum Foundation may need to make some breakthroughs in coordinating second or third-layer collaborative competition.
However, the future is difficult to predict, and the process of application scenarios landing is still quite challenging. In the past few years, the main on-chain interaction scenarios were mainly transactions, and the rich ecosystem of Ethereum provided various transaction scenarios. Honestly, the landing of large-scale application scenarios in the future may determine the success or failure of the public chain ecosystem.
Mankun Blockchain Legal Services: The big company problem has already appeared in Ethereum, whether it is people in the Foundation being idle or the leader constantly preaching political correctness. Ethereum uses a compliant model of selling tokens through a non-profit organization to manage tokens and ecosystem development, which may be instructive for blockchain entrepreneurs ten years later.
Xiaozhu Web3: This is actually the biggest difference between Ethereum and Bitcoin, or all smart contract platforms, and Bitcoin. Bitcoin itself is more of a store of value, or a narrative of digital gold, which does not require many other functions. On the other hand, public chains of smart contract platforms play the role of a “world computer,” and technology needs to be continuously iterated and upgraded, attracting developers to continuously develop on their platform. Therefore, it is inevitable to have a role like a foundation as a leader in the development direction. This will definitely not be a burden on the Ethereum ecosystem. The Ethereum Foundation is one of the largest and most open organizations in the crypto world, and has always emerged from controversy. The foundations of other smart contract platform public chains have no controversy, one reason being that they are too small.On the other hand, due to its over-centralization, the Ethereum Foundation is facing challenges currently, whether it’s core developers moonlighting for money or the absolute influence of Vitalik Buterin. These are issues that other foundations may also face in the future. I believe the Ethereum Foundation has anti-fragility as an organization and will emerge from this controversy, with the development of Ethereum not entirely under the control of the Ethereum Foundation but also empowered by the strength of the larger developer community. This is the charm of open source and decentralization.
Tom Analysis: The approval of ETFs and the entry of traditional financial institutions are huge shocks to the existing Ethereum ecosystem. This will gradually weaken the influence of the Ethereum Foundation and Vitalik Buterin, forming new checks and balances, leading to a more diversified ecosystem and better prospects in the long run. After the Ethereum ETF approval, SoSoValue will also launch relevant sections to provide data on ETF holdings, allowing everyone to see the impact of traditional financial institutions entering the Ethereum ecosystem.
LFG Labs: For the current Ethereum ecosystem, Vitalik and the Ethereum Foundation are essential. One is responsible for delicately guiding the direction of “orthodoxy,” and the other is responsible for rallying the community for implementation. However, the dispersed and centralized architecture may have unknown implications in sensitive regulatory eyes, especially at sensitive nodes where ETFs are seeking breakthroughs. Deciding whether to push “de-Vitalik and EF (Ethereum Foundation)” is not an easy balance to strike.
4. What areas of the Ethereum ecosystem will benefit from the launch of ETH ETF? What are the potential opportunities?
LD Capital: MEME, modularization, Restaking, etc.
Web3 Xiao Lv: Currently, there are not many native narratives on the Ethereum ecosystem. With the approval of ETH ETF, the continuous interaction between on-chain and off-chain will further enhance traditional financial tokenization landing scenarios. However, this is a long-term process and may not be seen in the short term.
Eureka Partners: The approval of the ETH ETF does not include staking functions, which is good news for the current Staking and Restaking areas in Ethereum. Since the issuer of ETFs cannot stake ETH, this can to some extent ensure the balance of staking in the network and prevent one party from monopolizing the staking market.
Block Unicorn: First, the entire Ethereum ecosystem will benefit, with the Ethereum price being the first to benefit. This will be followed by Ethereum DEX, lending protocols, and more. Secondly, the potential opportunities lie in RWA, which is the entry point favored by traditional institutions.
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