Alts ETF Craze: Wall Street's New Darling and Regulatory Changes

Bitcoin surged and then fell back, but Ethereum broke through 3600 USD, driving a broad increase in multiple sectors such as Defi and Layer 2. The altcoin market has finally begun to show signs of life, reversing its previous downturn. However, just a few days ago, when Bitcoin was close to 100,000 USD, the altcoin market was still bleak, and many investors found themselves in a desperate situation.

In this market environment, Wall Street has developed a keen interest in alts ETFs. Against the backdrop of unprecedented regulatory benefits, this move has injected new vitality into the long-dormant altcoin market.

A week ago, when Bitcoin broke through $99,000, the market reaction was surprisingly muted. In this bull market led by institutions, most participants have not truly benefited, and the altcoins they hold have been continuously drained by Bitcoin, showing a persistent downward trend. This stands in stark contrast to the fervent promotion of the bull market, leaving many investors feeling helpless.

As a recognized mainstream coin, Ethereum's relative increase is far less than that of Bitcoin. The ETH/BTC exchange rate has continued to decline throughout the year, dropping from a low of 0.053 to 0.032, only starting to rebound recently. The performance of other coins has been even less satisfactory.

However, the altcoin market seems to be starting to recover recently. Coins such as SOL, XRP, LTC, and Link have taken the lead, with Solana's DEX daily trading volume exceeding $6 billion, and XRP once surging to $1.63. This morning, Ethereum strongly broke through $3600, driving the entire altcoin sector to rise broadly, with the Defi sector seeing a 24-hour increase of up to 8.47%.

The reason for the rise of alts, besides the positive sentiment brought by the bull market, is largely due to the participation of Wall Street, with ETFs being the most direct manifestation.

Looking back at the beginning of this bull market, the launch of 11 Bitcoin spot ETFs ignited a market frenzy. Subsequently, the market began to focus on the next token that might receive ETF approval, with Solana once becoming the most highly anticipated coin.

At the end of June, several major asset management giants submitted applications for Solana ETFs to the SEC. However, the SEC's tough stance quickly cooled down this wave of speculation. But by November, the market situation changed. The Cboe BZX exchange proposed to list four Solana-related ETFs, and if the SEC officially accepts, the final approval deadline is expected to be in early August 2025.

It's not just Solana; more alts ETF applications are on the way. Recently, several institutions submitted spot ETF applications for coins like XRP, Litecoin, and HBAR to the SEC. It is reported that other institutions are preparing ETF applications for ADA or AVAX.

Despite the fact that most alts currently do not fully meet the implicit requirements for ETF approval from an objective standpoint, the market still holds a positive attitude towards the approval of ETFs for coins such as SOL and XRP. Some analysts believe that the approval of these ETFs may be completed by the end of 2025.

Behind this optimistic sentiment is the change in the regulatory environment brought by the new government set to take office. Current SEC Chairman Gary Gensler will leave his position in January 2025, which puts a pause on the SEC's strict regulations in recent years. The new government holds a more open attitude towards cryptocurrencies, with several cabinet members being crypto supporters, indicating that future regulations may be more lenient.

Even though the prospects for altcoin ETFs remain unclear, Wall Street is unwilling to give up on this massive market worth over $30 trillion. Traditional institutions are building new investment products and derivatives around crypto assets so that investors can incorporate crypto assets into their portfolios.

In the long term, as regulatory restrictions ease and investor interest increases, it will become an inevitable trend for institutions to conduct in-depth research on crypto assets. The productization and standardization of crypto assets will be further strengthened, and the derivatives market may experience explosive growth. Investors will have more ways to participate in the investment of cryptocurrency-related products.

However, the actual capital inflow into ETFs remains to be seen. Currently, apart from Bitcoin and Ethereum, the appeal of other crypto products to traditional capital appears to be quite limited.

Regardless of how the subsequent approvals progress, the hype surrounding altcoin ETFs has already begun, injecting a shot of adrenaline into the long-dormant altcoin market. This new wave led by Wall Street may bring new opportunities and challenges to the crypto market.