The discussion about whether other tokens can launch ETFs has become popular. What challenges will be faced in approving ETFs for other tokens? If it is possible, which tokens are more likely to be launched first, SOL, PEPE, or DOGE?
Written by: Weilin
In the early morning of May 24th, the Ethereum ETF in the United States reached a milestone as the US Securities and Exchange Commission (SEC) approved the issuer’s 19b-4 filing. As a result, the discussion about whether other tokens can launch ETFs has become popular. What challenges will be faced in approving ETFs for other tokens? If it is possible, which tokens are more likely to be launched first, SOL, PEPE, or DOGE?
From the perspective of industry experts, token consensus and whether it is defined as a security are two hard thresholds. Currently, if there are no major changes in the US regulatory framework, the next ETF may not be produced until two to three years later.
SOL has high expectations but low probability
On May 23rd, Brian Kelly, CEO of BKCM, predicted on CNBC’s “Fast Money” program that Solana (SOL) could become the next cryptocurrency to launch an ETF in the United States. However, this bold prediction was immediately met with opposition from industry experts, who pointed out several significant regulatory and market challenges.
Firstly, the SEC has classified Solana as a security, which was mentioned in lawsuits against major exchanges such as Coinbase and Kraken. Therefore, this makes the approval path for Solana more complicated. In addition, unlike Bitcoin and Ethereum, which have futures ETFs, Solana does not have this crucial market foundation.
James Seyffart, an ETF analyst at Bloomberg, stated that before any spot ETF is launched, Solana needs futures products listed on the Chicago Mercantile Exchange or a strong cryptocurrency regulatory framework established by the US Congress.
Currently, Bitcoin and Ethereum are the only approved cryptocurrency futures ETFs in the United States. Major ETF issuers are also not interested in launching ETFs for other alternative coins, including Solana, according to well-known ETF issuer BlackRock.
Although Franklin Templeton, which manages trillions of dollars in assets, recently praised Solana and one of its founders Anatoly Yakovenko, sparking speculation about whether the company would consider applying for a spot Solana ETF in the future, few ETF issuers currently express any intention to apply for a spot Solana ETF.
Nate Geraci, President of ETF Store, agrees with Seyffart’s view, believing that a spot Solana ETF may not exist without a futures market and clearer rules. He stated that before this product has any chance of approval, Congress needs to establish a legal regulatory framework for cryptocurrencies.
Adam Cochran, a partner at Cinneamhain Ventures, believes that due to simpler regulatory conditions, Litecoin (LTC) or Dogecoin (DOGE) may be the next cryptocurrencies to obtain ETF approval. Litecoin and Dogecoin both adopt a proof-of-work (PoW) consensus mechanism similar to Bitcoin, which may make their regulatory paths less controversial.
On May 23rd, Grayscale launched two new investment trust funds, Grayscale Near Trust (NEAR) and Grayscale Stacks Trust (STX). Rayhaneh Sharif-Askary, Chief Product and Research Officer of Grayscale, stated that they are committed to launching new products that allow investors to access emerging and developing parts of the cryptocurrency ecosystem. Some believe that the moves of institutions like Grayscale may also serve as clues for the next ETF, but the current situation is unclear.
Consensus and whether it is defined as a security are hard thresholds
On May 23rd, in the Twitter Space event “What Will Ethereum Spot ETF Bring?” jointly organized by PANews and OKX, the attendees also discussed this issue. The host of Zero × Ganhuo Store, Big Orange @0xVeryBigOrange, believes that the analysis should start from the top 10 or even the top 5 in terms of market value, excluding Bitcoin and Ethereum. In my opinion, Solana is almost impossible because there are many ongoing lawsuits and disputes. BNB is also unlikely. I think DOGE may have a higher probability.
“I have been paying attention to DOGE recently, but I still think it is highly unlikely for other tokens to launch ETFs soon, and there is a qualitative leap between launching and not launching. You can use the process of elimination, and smaller market cap tokens are even less worth considering,” added Big Orange.
0xAA, an Ethereum ecosystem developer, and Big Orange share the same view. “After Ethereum, I also think it should be based on market value. I hope meme tokens can have more opportunities because meme tokens launched through fair launches may be the least like securities. However, I don’t think the public in the United States will invest in meme tokens in the short term. So let’s take it slow.”
Mindao, the founder of dForce, said, “Several indicators have been mentioned before, one of them is the concentration of chips. From this point of view, it is indeed within the top 20. I think it is also related to stickiness. For example, Bitcoin and Ethereum have been in the market for more than 10 years, and the chips are already very decentralized, while Solana has only been around for four to five years. In addition, it has been mentioned before that its foundation is concentrated, including FTX previously holding a 10% proportion, and the relevant people added together may not be less than 20%, so Solana is basically impossible.”
The approval of Bitcoin and Ethereum ETFs also has a leading indicator, which is that they must be traded on the Chicago Mercantile Exchange (CME) in the United States because the ETF itself needs to reference prices. Therefore, except for Ethereum and BTC, there are no other underlying assets traded on it. I think there may be a window period of at least two to three years without any new ETFs. If there is a third one, I think Dogecoin may meet this requirement, but the market cap of Dogecoin is too low. I think it seems somewhat disappointing to create an ETF with just over 20 billion US dollars.
Currently, Bitcoin and Ethereum have a very strong advantage in ETFs because their narratives are completely different. The narrative of Ethereum overlaps highly with Solana. So, why Solana when there is Ethereum? Why do we need others? There may not be much narrative differentiation, so at least for the next two to three years, BTC and ETH may be the only investable ETFs, and it is difficult to see any others.
Data analyst Phyrex believes that on an annual basis, it is very possible. Secondly, I want to focus on DOGE. We still need to look at the conditions for SEC to approve a spot ETF. The first condition is that it must be a non-security, and DOGE is indeed a non-security, which is likely to be met.
The second point is that there must be sufficient consensus, which refers to the market value of funds. Another point is when we see rejections of ETFs, which include market manipulation. In fact, DOGE has very obvious market manipulation. Every time Elon Musk mentions anything related to DOGE, it will have an impact on the market. The price of DOGE can experience large fluctuations. So from this perspective, it belongs to highly market-concentrated and highly market-manipulated.
Therefore, in this aspect, no matter who becomes the chairman of the SEC, whether FIT21 has passed or not, the possibility of DOGE obtaining a spot ETF is very low, very low, and this is also a reason for its market cap.
In terms of market cap, regardless of whether it is DOGE or anyone else, the difference is actually very large. Solana, as we all know, is impossible. Even if the consensus has been reached, the main issue is the SEC. The SEC needs to save face, especially now that the SEC has targeted Solana as a security in the Coinbase lawsuit. So there will definitely be a lawsuit between Solana and the SEC, it’s just a matter of when.
Even if Gary Gensler (SEC chairman) is replaced this time, it will still have an impact on the relationship between Solana and Coinbase, and there will be a lawsuit. BNB is unlikely. Ripple is possible, but Ripple has not won any SEC lawsuits. Ripple has not won at all, it has only reduced the loss from 100 to 80 points.
In the overall cryptocurrency market, if it satisfies the condition of being a security, then it may not have enough consensus. If it satisfies the consensus, it may not meet the condition of being a security. According to the SEC, it has officially stated that, except for BTC, ETH, BCH, LTC, DOGE, and STX, there is no clear statement that any other tokens are not securities.
As Mindao mentioned, you must first be listed on the CME, but you haven’t even seen this layer, so it may be more difficult.
So, even if there will be new ETFs in the future, it is only possible after FIT21 has passed, to see if the definition for the entire cryptocurrency industry has changed. If this criterion is not changed, it is very likely that the goal will be on an annual basis, and even all the existing tokens may not meet the criteria.
Tags:
DOGE
INDAO
PEPE
SEC
Solana
Ethereum
Bitcoin
United States
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Note: The views expressed in this article do not represent investment advice.
Original link: https://www.bitpush.news/articles/6802694
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