“Creators’ Say” is a dialogue column for creators launched by Foresight News, where we will ask selected outstanding creators 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 23rd, local time in the United States, the SEC approved 8 Ethereum spot ETFs’ 19b-4 forms, marking another milestone event in the crypto industry after the approval of the Bitcoin spot ETF this year. The softening regulatory attitude undoubtedly serves as an important catalyst for the current bull market, but the market’s response has been unexpected. Can this positive news lead Ethereum to take the baton and lead the bull market to prosperity?
This edition of “Creators’ Say” focuses on “Spot ETH ETF Approved, Can Ethereum Lead the Bull Market?” We have invited the creators who made it to the Foresight News May 2024 Outstanding Creators List, including LD Capital, Web3 Law, Eureka Partners, Block unicorn, inpower Wang Jun, Manqun Blockchain Legal Services, Pig Web3, Tom Analysis, and LFG Labs, to join the discussion.
Centered around the topic of “ETH ETF,” we posed five questions: “Why did the US SEC’s attitude suddenly change?” “Why is the market reaction to this positive news far less than that of the BTC ETF approval?” “What impact will the recent controversies surrounding the Ethereum Foundation have?” “Which ecosystems will benefit from this?” and “What are the recent investment strategies?” Here are the answers we gathered:
1. LD Capital: Regulators and politicians are unpredictable. The sudden change in attitude by the SEC is influenced by political factors. The passing of the FIT21 bill in the House of Representatives also indicates a loosening of crypto regulations in this phase. From a regulatory perspective, the approval of the ETH ETF helps Ethereum overcome years of uncertainty regarding its security classification, which is also positive for most tokens with vague security definitions.
2. Web3 Law: The reasons behind the approval of the BTC ETF earlier in the year include legal pressure from Grayscale’s successful lawsuit, BTC’s non-security nature, regulation of BTC in futures, and push by traditional financial institutions like Blackrock. The approval of the ETH ETF signifies mainstream acceptance of crypto assets and exploration of blockchain in traditional finance.
3. Eureka Partners: The recent quietness in the crypto market has shifted focus to macro markets. The approval of the ETH ETF clarifies the debate between the SEC and CFTC regarding Ethereum’s classification as a commodity or security.
4. Block unicorn: The shift in the US SEC’s attitude towards crypto is a result of bipartisan consensus on the benefits of crypto for the government. Both parties have used crypto donations for presidential elections, attracting more people to the industry.
5. Inpower Wang Jun: The main reason for the approval of the ETH ETF is to attract crypto voters. With over 50 million crypto users in the US, political dynamics will continue to influence the industry’s future.
6. Manqun Blockchain Legal Services: The trend of crypto assets cannot be stopped, as seen from the growing number of users. The approval of the ETH ETF whitens mainstream virtual currency projects and alerts other blockchain projects to comply with regulations.
7. Pig Web3: The approval of the ETH ETF was inevitable, given Ethereum’s status in the blockchain world. The sudden change in the SEC’s attitude towards Ethereum may indicate recognition of its position in the market.
8. Tom Analysis: The quick approval of the Hong Kong ETH ETF in April and the US ETH ETF 19b-4 document suggests top-level support in a global geopolitical competition for crypto ecosystems and users’ minds. This will further legitimize crypto assets in the global financial system.
9. LFG Labs: The election year is a key factor, with a significant number of US citizens holding crypto. Regulatory leniency at the administrative and legislative levels has shifted the focus towards a more mainstream view of crypto assets.
2. LD Capital: Traditional institutions are more familiar with and accepting of BTC, leading to higher inflows of funds post ETH ETF approval. ETH may become the main theme in the middle to late stages of the bull market, but in the short term, BTC remains dominant.
3. Web3 Law: There are inherent differences in the asset properties of BTC and ETH. The market size and institutional demand for these assets differ, resulting in potentially disappointing fund flows for ETH.
The End.The asset management scale of the Hong Kong spot BTC ETF is about 239 million US dollars, while the asset management scale of the ETH ETF is 41 million US dollars, with a ratio of about 6:1. The ratio of the Canadian spot ETF 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 the ETF is to allow more users from traditional industries to buy and sell BTC as they do with 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 bypass BTC.
We at Eureka Partners believe that the bull market is actually a logic of a primary uptrend, where the market narrative will show a cyclical change. Ethereum, as a market with great potential even after its development, will inevitably bring forth a series of good projects and voices.
Block unicorn: First of all, after the Bitcoin ETF was listed, there was no doubt that the Ethereum ETF would be listed as well. People in the industry had already bought Ethereum during the Bitcoin listing period, but this influx of funds did not drive up the price of Ethereum. The news of the accelerated approval of the Ethereum ETF attracted unexpected new funds from the industry, leading to a surge in the price of Ethereum.
Secondly, in the recent past, or even recently, because Ethereum did not rise to the satisfaction of some, a sense of disgust has emerged. I think this sentiment is mostly from retail investors, as institutional investors surely have enough patience to wait for Ethereum. Currently, the financial infrastructure of our industry is almost dominated by Ethereum, and the entire logic of the world is that almost all economic movements in various industries cannot be separated from banks. Ethereum has the most advanced financial infrastructure and innovation in the entire industry, so a rise in ETH can benefit the entire industry, as the volume determines that Ethereum has such strong energy to drive the market.
inpower Wang Jun: It’s not really worse off, as it has increased by about 20% due to this positive news. The previous price increase of BTC was not entirely due to the ETF, but due to factors such as halving / the multi-faceted ecology of Bitcoin.
The current ETH ETF has not been fully approved yet, and half of the products will only be launched after approval.
Personally, I believe 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.
Regarding the current theme, I personally think that mainstream capital is focusing on large-scale application scenarios that require high-performance chains.
To be honest, I feel that Solana and Ethereum may not have much difference now, and this 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: A rallying force, then weakening, and finally exhausted. This principle applies to virtual currency ETFs as well. Investors do not have as much interest in the story of the integration of the lower reaches. This round of the 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.
Little Pig Web3: Firstly, if altcoins are separated from the market, BTC ETF approval leads to a surge in BTC, starting a crypto bull market. Similarly, ETH ETF approval results in a surge in ETH, reversing the ETH/BTC exchange rate. Other altcoins without ETF advantages not rising is just a normal occurrence. The lack of a significant reaction to the approval of the ETH ETF may be due to the initial market expectations set by the BTC ETF approval, leading to many altcoins experiencing a significant increase in value. As a result, funds only flowed into BTC, causing many altcoins to fall back to their levels before the BTC ETF approval, hence the normal response to the approval of the ETH ETF. As for whether the main theme of this bull market will return to Ethereum, I hope it will, but the current narrative, whether it’s Layer2 or Restaking, lacks some practical applications, unlike the astonishing feeling of DeFi in the 2020s. Therefore, I believe ETH still needs a “turning point moment,” a genuine application that can be implemented to better set the main theme of this bull market.
Tom Analysis: The market’s response to the Ethereum ETF is relatively small at the moment, mainly due to several reasons: 1) After the approval of the Bitcoin ETF, the market has already implied the expectation of the approval of the Ethereum ETF. Ethereum’s price started rising from around $1600 in October 2023 to around $2400 in early January 2024, along with Bitcoin’s rise to break $4000, making the expectation of the Ethereum ETF an important driving force. 2) Currently, only the Hong Kong Ethereum ETF is officially trading, but mainland users cannot purchase it, resulting in a lack of incremental buying pressure. According to SoSo Value data, the average daily trading volume of the Hong Kong Ethereum ETF has been only $1.43 million for the 25 trading days since its listing. The total Ethereum lock-up volume of the only Hong Kong Ethereum ETF is only 14,000 coins, and it also supports physical subscription, failing to replicate the path of the US Bitcoin Ethereum ETF, which brought a lot of buying pressure to the chain. 3) Another minor reason is that currently, both the Hong Kong Ethereum ETF and the expected US Ethereum ETF do not support staking rewards. This means that for users capable of holding coins, the returns from holding the ETF are about 3 percentage points lower annually compared to holding the coins directly.
LFG Labs: If we look at things with a calm and rational perspective, the Bitcoin ETF took almost half a year from the beginning of the news to its final approval and launch, combined with the rhythm of the market rising, so Ethereum may also follow this gradual pace. Of course, from a conspiratorial point of view, there is even the possibility that the market already expects (insiders) the approval of the Ethereum ETF this year.
I believe that Ethereum is still the main axis of innovation in the Web3 ecosystem at the moment. It’s just that in terms of attracting incremental users and equalizing benefits, other ecosystems have taken the lead in this current cycle, making Ethereum seem a bit lonely.
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 working part-time to earn money and Vitalik’s absolute influence. How do you think these issues will affect Ethereum’s compliance route, 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 and funding participation attributes caused by political alignments may lead to it facing suppression from competitors like Solana.
Web3 Xiaolu: Younger public chain foundations (more like startups) may be able to meet the high-growth needs of users, where users tend to link price growth and the success of foundation governance. The Ethereum Foundation is a relatively long-operating institution and cannot avoid governance issues (mid-life crisis, growth bottleneck) in the path to decentralization. This is a systemic engineering problem, including mechanisms for transparency, terms, and the flow of rights, etc.
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 an inevitable process. The presence of Vitalik and the foundation is mainly due to the current imperfect infrastructure. Just like a child learning to walk, we all need to propose some good suggestions in the early stages to ensure that the development path does not deviate. Therefore, so far, Vitalik and the foundation have played more of a positive role in the future compliance route, entry of traditional institutions, and other broader aspects.
Block unicorn: Firstly, the matter of the Ethereum Foundation members taking side jobs to earn extra money is not unique to Ethereum. People from the SOL Foundation used to promote a certain MEME coin every day, and yet no one criticized them. Secondly, as Ethereum gradually decentralizes, most foundation members will become less important, with only a few having an impact on the industry. After the entry of traditional institutions, these foundation members will become increasingly less important, and traditional institutions will vie for dominance in the industry to gain more benefits.
inpower Wang Jun: Personally, I think the influence of the Ethereum Foundation is no longer as absolute as before, including Vitalik’s absolute influence not being as strong as a few years ago. This is actually a good thing, as it is part of the decentralization experience. In the long run, whether Ethereum can maintain its current position depends on maintaining an advantage in the competition for applications to be implemented. The Ethereum Foundation may need some breakthroughs in coordinating second or third-layer collaborative competition.
However, the future is hard to predict, and the process of implementing 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 provided more transaction scenarios. In the future, large-scale application scenarios may determine the success or failure of public chain ecosystems.
Mankun Blockchain Legal Services: The big company syndrome has already appeared in Ethereum, whether it’s people in the foundation being idle or the leader constantly preaching political correctness. Ethereum sells tokens like a company and manages token and ecosystem development like a nonprofit organization, which is instructive for future blockchain entrepreneurs issuing tokens.
Little Pig Web3: This is actually the biggest difference between Ethereum and Bitcoin, or between all smart contract platforms and Bitcoin. Bitcoin itself serves more as a store of value, a digital gold narrative that does not need many other features. On the other hand, public smart contract platforms act as a “world computer,” requiring continuous technical iterations and upgrades to attract developers to build on their platform. Therefore, it is inevitable that there will be roles like foundations as leaders in the development direction, which is definitely not a burden on the Ethereum ecosystem. The Ethereum Foundation, as one of the largest and most open organizations in the crypto world, has always emerged from controversy. Other public smart contract platforms’ foundation controversies are either due to their small size or the lack of controversy, as they are too small.On the one hand, due to its centralization, the Ethereum Foundation is currently facing issues such as core developers working part-time for profit and Vitalik’s absolute influence, which may be problems that other foundations will face in the future. I believe that the Ethereum Foundation has antifragility, and this time it will also emerge from controversy. 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 of Ethereum’s compliance route, traditional institutional entry, and broader prospects depends on the decisions of the Ethereum Foundation and the attitude of the entire developer community, which is too early to discuss now.
Tom’s Analysis: The approval of ETFs and the entry of traditional financial institutions are a major blow to the existing Ethereum ecosystem, which will gradually weaken the influence of the Ethereum Foundation and Vitalik, forming a new balance. This will lead to the ecosystem moving away from the monopolization by the Ethereum Foundation, further diversifying the ecosystem, and looking more promising in the long run. After the launch of the ETH ETF, SoSoValue will also launch relevant views, providing 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, both Vitalik and the Ethereum Foundation are essential. One is responsible for delicately controlling the direction of “orthodoxy,” and the other is responsible for rallying to implement it. However, the implications of this dispersed yet centralized structure in the eyes of regulators remain unknown, especially at sensitive points when ETFs are seeking breakthroughs. Deciding whether to push “without Vitalik and EF (Ethereum Foundation)” is also not an easy choice to make.
LD Capital: The head MEME, modularization, Restaking, and more will benefit from the ETH ETF. Web3 Little Law: Currently, there are not many new native narratives on the Ethereum ecosystem. With the approval of ETH ETF, the continuous interaction between on-chain and off-chain is expected to strengthen the traditional financial tokenization landing scenario. However, this is a long-term process that may not be visible in the short term.
Eureka Partners: The approval of ETH ETF does not include staking functionality, which is good news for the Staking and Restaking domains in the current Ethereum ecosystem. Due to the issuer of the ETF not being able to stake ETH, it can to some extent ensure the staking balance of the network, avoiding the monopoly of the staking market by one party.
Block Unicorn: The entire Ethereum ecosystem will benefit from the ETH ETF, with the price of Ethereum being the first to be impacted. Subsequently, Ethereum DEX, lending protocols, and more will benefit. The potential opportunity lies in RWA, the preferred entry for traditional institutions.
inpower Wang Jun: After the launch of Ethereum, traditional funds can conveniently enter on a large scale. This also confirms the position of Ethereum.
However, personally, I believe that short-term Ethereum coin prices are influenced by fund flows, medium-term by policies, and long-term by applications. Short-term factors are complex, and those who analyze candlesticks may have more experience, but I don’t focus on that. In the medium term, this ETH ETF is also good for Coinbase, and it may still have to use their shared supervision plan. From this perspective, Ethereum’s Layer 2 chain may benefit. In the long term, I will focus more on the application scenarios of application chains. However, the competition between various Ethereum L2 and Solana is becoming more intense, giving a feeling of a showdown.
Mankun Blockchain Legal Services: Tokenizing traditional physical assets will benefit because these large institutions value security more than network efficiency. The combination of the financial sector and Web3 should be the most landable scenario in this round of Ethereum’s bull market.
Little Pig Web3: The current narrative of ETF mainly focuses on Layer2 and Restaking, lacking some practicality. I don’t look at the perspective of ETH ETF online, but from the perspective of practical applications. Layer2 may have a “singularity moment” where truly landable applications emerge because Layer2 is essentially Ethereum’s scaling solution, addressing the low TPS and slow transaction confirmation speed of Ethereum, which hinders the development of the application layer. Users are more accustomed to surfing in the high-performance but centralized Web2 world. Layer2 actually improves user experience and can continue to build Layer3 on top of Layer2, which is application chains, to provide a better user experience for revolutionary applications. Currently, the development of Layer2 focuses more on underlying technologies, especially ZK technology. I believe that ZK technology is the endgame of Layer2 in Ethereum’s future, but without applications, underlying technology is just a castle in the air. So, I see more potential opportunities in the application layer, which can lower the threshold for user adoption, making it easier for blockchain to be widely adopted, such as AA wallets, GameFi, SocialFi, etc.
Tom’s Analysis: The launch of the ETF will bring a large amount of off-chain capital into the Ethereum ecosystem, which will have a significant positive impact on various applications within the Ethereum ecosystem. The most direct beneficiaries may be the DeFi ecosystem related to finance, where protocols like lending will benefit from the appreciation of underlying assets, further expanding rapidly. In addition, the RWA asset track for traditional assets on-chain will receive more attention, with more forces from traditional finance entering. I recommend paying attention to SoSoValue’s RWA index, which has been among the top performers in the RWA track in recent months, with a rise of 19.5% since the beginning of the year.
LFG Labs: I am looking at new scenario applications on L2 and increasing positions in some basic DeFi protocols.
* Note: The opinions in the article represent the views of the interviewees and do not represent the views of the institutions and Foreisght News.
Tags
DeFi
SEC
Solana
WEB3
Ethereum
futures
Bitcoin
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https://foresightnews.pro/article/detail/61913
Note: All opinions in the article are the author’s opinions and do not constitute investment advice.
