“Creators Say” is a dialogue column for content creators launched by Foresight News. We will ask outstanding creators selected each month about 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 for the cryptocurrency industry this year following the approval of the Bitcoin spot ETF. The softening regulatory attitude is undoubtedly an important catalyst for this round of bull market, however, the market’s response has been unexpected. Can this positive news lead Ethereum to take the lead and drive the bull market towards prosperity?
This issue of “Creators Say” is themed “Spot ETH ETF Approved, Can Ethereum Lead the Bull Market?” We invited the creators who made it to the May 2024 Foresight News outstanding creators list, including LD Capital, Web3 Xiaolu, Eureka Partners, Block unicorn, inpower Wang Jun, Mankun Blockchain Legal Services, Little Pig Web3, Tom Analysis, and LFG Labs, to join the discussion.
Around the topic of “ETH ETF,” we raised five questions: “Why did the attitude of the US SEC suddenly change?” “Why did the market reaction to this positive news fall short of the BTC ETF?” “What impact will the recent controversies surrounding 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 the US SEC’s attitude, what do you think is the reason? What impact does this have on the cryptocurrency industry from a regulatory perspective?
LD Capital: Regulators and politicians are unpredictable. Looking at the ETH CME holdings, there was a significant increase from 22.59 thousand coins on May 20 to 31.9 thousand coins on June 6, indicating a short time span for significant institutional buying, showing that institutions were not very optimistic about ETH ETFs before, and there were not many long positions placed in advance. Therefore, the SEC’s sudden change is influenced by political factors, and the passing of the FIT21 bill (mainly aimed at establishing a regulatory system for the US cryptocurrency market, setting consumer protection measures, designating the Commodity Futures Trading Commission (CFTC) as the primary regulator of digital assets and non-securities spot market regulators) also signals a loosening of cryptocurrency regulation at this stage. Although this bill still needs to pass through the Senate, presidential action, etc., and Biden vetoed the SAB121 vote on June 3, there is a good chance that the FIT21 bill will be overturned in the upcoming process. The political maneuvering before the elections will continue to have a decisive impact on the future of the cryptocurrency market. But from a regulatory perspective, the approval of the ETH ETF helps it overcome years of uncertainty in securities classification, which is also positive for most tokens that had vague securities definitions before.
Web3 Xiaolu: The reasons behind the approval of the BTC ETF earlier this year were 1) Grayscale’s successful lawsuit, pressure from the court; 2) BTC’s non-security attributes; 3) BTC’s regulation in the futures market; and 4) the push from traditional financial institutions like Blackrock. Based on this, SEC Chairman Gary Gensler reluctantly voted to approve the BTC ETF.
Applying the same logic to the ETH ETF, there is a possibility that ETH could be classified as a security, as we have seen the SEC investigating the Ethereum Foundation. Additionally, the SEC has issued various Wells Notices to Uniswap, Robinhood, and others, putting regulatory pressure on them.
The real change is a political shift in the United States, driven by 1) the advancement of the US elections (with US Crypto Holders accounting for 15% of the US population), 2) Trump’s Pro Crypto style, and 3) support from traditional financial institutions. The approval of the ETH ETF will have far-reaching effects on the cryptocurrency market, signaling mainstream acceptance of crypto assets (more likely in terms of investment and asset allocation). It also indicates a deeper exploration of blockchain transforming traditional finance by mainstream financial institutions (such as the tokenization of Blackrock funds, the DTCC exploring the possibility of blockchain tokenized securities settlement, and cross-border blockchain payment settlements).
Eureka Partners: The recent quietness in the cryptocurrency market has shifted users’ focus to the macro market. For ETH, its biggest controversy is whether ETH belongs to commodities or securities, an ongoing debate between the SEC and the CFTC. The day before the approval of the ETH ETF, the FIT21 bill was passed, categorizing ETH as a commodity, making the approval of the ETH ETF very clear.
From a regulatory perspective, the approval of the ETH ETF signifies a consensus in the US regarding ETH, that non-staking ETH is considered a commodity, while staked ETH is considered a security. This will clarify the subsequent policy impacts in the US.
Block unicorn: Firstly, this shift represents a consensus reached between the US Democratic and Republican parties that cryptocurrencies can benefit the US government, accelerating the approval process by the SEC. Secondly, both parties have used cryptocurrencies for presidential election donations, marking an important move in the history of cryptocurrency. This will attract more people to enter the industry, and the outcome of the presidential election can indirectly impact a billion people worldwide. If 50 million new people are attracted to this industry, it will have a significant impact on the industry’s volatility.
Inpower Wang Jun: I personally think the main goal is to attract crypto voters. Currently, the key officials at the SEC are from the Democratic Party, but they are adopting a conservative strategy in terms of crypto policies. It is said that there are 50 million voters in the US who are crypto users, and Trump is actively trying to win over this voter base. In this context, the Democratic Party should also take proactive measures and not give up this voter base.
Mankun Blockchain Legal Services: If you can’t beat them, join them. According to statistics, there are over 50 million cryptocurrency users in the US, and the trend is unstoppable. The regulatory layer, including the SEC, understands this trend and rather than let other governments benefit, it’s better for the US to take advantage of it. From a regulatory perspective, it whitewashes mainstream virtual currency projects and warns other blockchain projects that while launching tokens is possible, compliance costs should be minimized.
Little Pig Web3: Firstly, I think the approval of the ETH ETF was only a matter of time. ETH has always been a representative of blockchain 2.0 and has enough consensus in the crypto community. Secondly, regarding the sudden change in the US SEC’s attitude, there are political reasons (not detailed here) and also the approval of the Bitcoin ETF previously. The approval of the BTC ETF definitely involved a detailed investigation of the entire crypto market, and as the saying goes, “Consensus is value.” The consensus on BTC/ETH is already strong, so the sudden change in the SEC’s attitude may be an acknowledgment of ETH’s position in the crypto market. Finally, from a regulatory perspective, this is definitely beneficial for the cryptocurrency industry, a signal of mainstream market acceptance. We can also see that Hong Kong is also easing regulations and has taken the lead in introducing an ETH ETF, but for now, only BTC/ETH are benefiting. Some say this is an ETF bull run, which has little impact on altcoins. However, I believe that in the future, they will also benefit, but it will take some time for other cryptocurrencies 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. It is expected that there was top-level push behind both, indicating the global geopolitical competition for the crypto ecosystem and the minds of crypto users. Especially as the US presidential election heats up, the Republican Party has always been more friendly towards the crypto industry, with Trump clearly accepting crypto donations. The young crypto supporters are also a key voting bloc that the Democratic Party needs to win over. From this perspective, the sudden change in the US SEC’s attitude can be understood.
From a more macro and long-term perspective, the US financial regulatory system has a strong reference value globally. As Hong Kong serves as a testing ground for mainland China, its policies can radiate into the financial landscape of Chinese communities, and the swift approval of the Ethereum ETF will be an important step towards further legitimizing cryptocurrencies in the global financial system. This will continue to push crypto assets into mainstream investor portfolios, which is a long-term positive development.
LFG Labs: An election year is definitely a key factor. For the US, the group that directly or indirectly holds cryptocurrencies is already a significant force that cannot be ignored, especially with tight polling data, the “key few” are very important. The passing of regulatory measures at the administrative and legislative levels has prompted a shift in regulatory focus. Regardless of the actual outcome, this is a turning point for cryptocurrencies to further enter the mainstream view and gain a legal and compliant framework.
2. Why did the market react less positively to the ETH ETF positive news compared to the previous BTC ETF? Do you think the main theme of this bull market will return to Ethereum?
LD Capital: Traditional institutions have a higher familiarity and acceptance of BTC, and there are surveys showing that the net inflow of funds after the formal approval of the ETH ETF may be less than 20-30% of BTC. ETH will likely 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 more bullish sentiment towards BTC in the longer term (by the end of the year).
Web3 Xiaolu: The asset properties of BTC and ETH are fundamentally different. Traditional capital can accept BTC as a store of value tool but may not accept ETH in the same way. Considering the relative market sizes 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 was lackluster.
Would you like to read the full interview?The asset management scale of the spot BTC ETF in Hong Kong is about 239 million US dollars, while the asset management scale of the Ethereum (ETH) ETF is 41 million US dollars, with a ratio of approximately 6:1. The ratio of the spot ETF in Canada is similar, with the asset management scale of BTC and ETH being 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 just like stocks. For traditional industry users, the social consensus of BTC will be much stronger than that of ETH, as everyone’s market perception of Crypto cannot avoid BTC.
We at Eureka Partners believe that a bull market is actually a logic of the main upward trend, where the narrative of the market will show a cyclical change. Ethereum, as an ecological market with great potential even now, is bound to bring forth a series of good projects and voices.
Block Unicorn: Firstly, after the Bitcoin ETF was listed, it was a foregone conclusion that the Ethereum ETF would also be listed. People in the industry had already bought Ethereum during the Bitcoin listing period, but these existing funds did not cause a rise in Ethereum’s price. The news of the accelerated approval of the Ethereum ETF attracted unexpected new funds from the industry, causing a price surge in Ethereum.
Secondly, in the recent period, or even lately, due to Ethereum not rising to their satisfaction, a feeling of disgust has emerged. I think this sentiment is mostly from small retail investors, as large investors definitely have enough patience to wait for Ethereum. Currently, our industry’s financial infrastructure is almost monopolized by Ethereum, and the entire world’s operational logic is that almost all economic activities in all industries rely on banks. Ethereum has the most advanced financial infrastructure and innovation in the entire industry. An increase in Ethereum’s price can benefit the entire industry, as the volume determines Ethereum’s strong ability to drive the market.
Inpower Wang Jun: It’s not bad, with an increase of about 20% due to this good news. Previously, the price increase of BTC was not entirely due to the ETF, but was caused by various factors such as halving and the multi-dimensional ecology of Bitcoin.
The current ETH ETF has not been fully approved, and only half of the products will be launched after approval.
Personally, I think the approval of the Ethereum ETF is more of a positive for the entire crypto market. Many people are now paying attention to the progress of Solana’s ETF.
Regarding the main theme of this issue, personally, I think mainstream capital is focusing on large-scale application scenarios that have high requirements for performance chains.
To be honest, I feel that Solana and Ethereum may not have much difference now, which is related to the fragmentation of various Ethereum Layer 2 solutions. If they cannot form a united front, Solana may surpass Ethereum.
Mankun Blockchain Legal Services: The rise and fall of virtual currency ETFs follow the same principles. Investors are not very interested in the story of the integration of the lower-level mountains. This 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.
Piglet Web3: Firstly, if we exclude altcoins from the market, the approval of the BTC ETF led to a surge in BTC, starting 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 approval, their lack of rise is expected. The lack of a strong reaction to the approval of the ETH ETF may be due to the recent approval of the BTC ETF, creating market expectations and causing a surge in altcoins. However, most of the funds only went into BTC, causing many altcoins to fall back to their levels before the BTC ETF approval. Therefore, it is normal that the approval of the ETH ETF did not have a major impact. As for whether the main theme of this bull market will return to Ethereum, I hope it does, but the current narrative, whether it is Layer 2 or Restaking, lacks some practical applications, unlike the stunning DeFi developments of 20 years ago. Therefore, I believe ETH still needs a “tipping point” for a truly landable application to appear to better set the tone for this bull 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 expectations for the approval of the Ethereum ETF. The price of Ethereum started rising from around $1600 in October 2023 to around $2400 in early January 2024, accompanied by the rise of Bitcoin to above $4000. The expectation of the Ethereum ETF was a significant driver in this regard. 2) Currently, only the Hong Kong Ethereum ETF is officially trading, but since mainland users cannot purchase it, there is a lack of incremental buying interest, resulting in relatively low trading volume and market cap. According to SoSo Value data, the Hong Kong Ethereum ETF has had an average daily trading volume of only $1.43 million over 25 trading days since its listing. The total locked Ethereum in the three Hong Kong ETFs is only 14,000 coins. In addition, they support physical subscriptions and have not been able to replicate the path of the U.S. Bitcoin and Ethereum ETFs, bringing in a large number of buyers. 3) Another small reason is that the current Hong Kong Ethereum ETF, as well as the expected U.S. Ethereum ETF, do not support staking rewards. This means that for users capable of holding coins, holding an ETF offers lower annualized returns compared to holding coins directly by about 3 percentage points.
LFG Labs: Looking at it from a macro perspective, the Bitcoin ETF took about half a year from the brewing of the news to its final implementation, combined with the rhythm of the market rising. Therefore, it is not ruled out that Ethereum will follow the same incremental pace. Of course, from a conspiracy perspective, it cannot be ruled out that the market expects (insider information) the approval of the Ethereum ETF this year.
I believe that Ethereum is still the main axis of innovation in the Web3 ecosystem. However, in terms of attracting incremental users and equalizing income, other ecosystems in the current cycle have taken the lead, making Ethereum somewhat overshadowed.
Recently, the Ethereum Foundation has been controversial, with some believing that it has become a burden on the Ethereum ecosystem. This includes issues such as core developers earning money on the side and Vitalik’s absolute influence. How do you think these factors affect Ethereum’s compliance path, the entry of traditional institutions, and the broader outlook?
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, the regular operational selling pressure, political alignments resulting in funding participation attributes, etc. may lead to competition from competitors like Solana.
Web3 Law: Relatively younger public chain foundations (more like startups) may be able to meet the high growth needs of users, where users tend to link the growth of prices and the success of governance of the foundation. The Ethereum Foundation is a relatively long-running institution that cannot avoid governance issues on the path to decentralization (mid-life crisis, growth bottleneck). This is a systemic engineering, including transparency of mechanisms, terms, and the flow of rights.
Eureka Partners: Vitalik and the Ethereum Foundation have always been considered more 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 presence of Vitalik and the Foundation is mainly due to the current incomplete infrastructure, just like a child learning to walk, we all need to make some good suggestions in the early stages to ensure that the development path does not deviate. Therefore, so far, the role of Vitalik and the Foundation in the compliance path, the entry of traditional institutions, and other aspects is more of a positive driving force.
Block Unicorn: Firstly, when it comes to the issue of the Ethereum Foundation’s members taking side jobs to earn additional income, it is not unique to Ethereum. People from the SOL Foundation used to hype a certain MEME coin every day, but no one came out to criticize them. Secondly, as Ethereum gradually decentralizes, most members of the Foundation will become less important, and only a few Foundation members can influence the industry. With the entry of traditional institutions, these Foundations become less and less important, as traditional institutions will compete for influence in the industry to gain more benefits.
Inpower Wang Jun: Personally, I think the influence of the Ethereum Foundation is not as absolute as before, including Vitalik’s absolute influence not being as strong as it was a few years ago. This is actually a good thing, as it is the experience of decentralization. In the long run, to maintain its current position, Ethereum may need to maintain an advantage in the competition of application scenarios. The Ethereum Foundation may need to make some breakthroughs in coordinating Layer 2 or Layer 3 collaborative competition.
Overall, it is difficult to predict the future, and the process of landing application scenarios is still quite challenging. In the past few years, the main on-chain interaction scenarios were mainly transactions, and Ethereum’s rich ecosystem provides various transaction scenarios. In the future, the landing of large-scale application scenarios may determine the success or failure of the public chain ecosystem.The Ethereum Foundation is currently facing issues such as core developers earning money on the side and Vitalik’s absolute influence, which may be problems that other foundations will face in the future. However, I believe that the Ethereum Foundation has antifragility and will emerge from controversy this time. The development of Ethereum is not completely controlled by the Ethereum Foundation, but also by the power of the vast developer community, which is the charm of open source and decentralization. The impact on Ethereum’s compliance route, traditional institutional entry, and broader prospects will depend on the decisions of the Ethereum Foundation and the attitude of the entire developer community. It is too early to discuss this now.
Tom Analysis: The approval of ETFs and the entry of traditional financial institutions will have a huge impact on the existing Ethereum ecosystem, gradually weakening the influence of the Ethereum Foundation and Vitalik, and creating new checks and balances. This will lead to the ecosystem moving away from Ethereum Foundation’s centralization, further increasing ecosystem diversity, and potentially having better prospects in the long run. After the Ethereum ETF approval, SoSoValue will 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 both essential. One is responsible for delicately guiding the “orthodox” direction, and the other is responsible for rallying the community to implement it. However, the impact of this decentralized structure on sensitive regulatory eyes is still unknown, especially at the sensitive point where ETFs are seeking breakthroughs. Whether to push for “decentralization of Vitalik and the Ethereum Foundation” is also not an easy choice to make.
LD Capital: The head MEME, modularization, Restaking, and more will benefit from the Ethereum ETF. Web3 Little Lu: The Ethereum ecosystem currently lacks many native on-chain narratives. With the approval of the ETH ETF, the continuous interaction between on-chain and off-chain will enhance the traditional financial tokenization landing scenarios.
Eureka Partners: The approval of the ETH ETF does not include staking, which is good news for the Staking and Restaking domains in the current Ethereum ecosystem. Block unicorn: The entire Ethereum ecosystem will benefit from the ETF, starting with the price of Ethereum, followed by Ethereum DEX, lending protocols, etc. Furthermore, the potential opportunity lies in RWA, which is a preferred entry for traditional institutions.
inpower Wang Jun: After the launch of Ethereum, traditional capital will find it easier to enter on a large scale. However, I believe that the short-term price of Ethereum depends on capital flows, the mid-term depends on policies, and the long-term depends on application landing.
Man Kun Blockchain Legal Services: The tokenization of traditional physical assets will benefit, as these big institutions value security more than network efficiency. The integration of the financial sector with Web3 should be the most deployable scenario in this bull market cycle.
Little Pig Web3: The main narratives after the ETF are Layer2 and Restaking, lacking practicality. The potential opportunities are more in the application layer, reducing user barriers to blockchain adoption.
Tom Analysis: The ETF approval will bring a large amount of off-chain capital into the Ethereum ecosystem, positively impacting various applications within the ecosystem. The most direct beneficiaries may be DeFi ecosystems related to finance, such as lending protocols, which will benefit from the appreciation of underlying assets and further scale rapidly.
LD Capital: There haven’t been many adjustments in positions, still holding ETH firmly.
Web3 Little Lu: The approval of the ETH ETF signifies mainstream recognition of Ethereum, which includes its commodity and investment attributes, as well as security.
Eureka Partners: No significant adjustments in positions, still holding ETH firmly.
Block unicorn: With the acceleration of the Ethereum ETF, I am more inclined towards opportunities in the RWA track, shifting more funds into RWA in positions.
inpower Wang Jun: The biggest change is holding more positions in Solana.
These are personal opinions of the interviewees and do not represent the views of their organizations or Foreisght News.