Title: The Future of the Crypto Market After Ethereum ETF Approval: A New Era of Altcoins
Introduction:
In my opinion, the crypto market will experience a prolonged “altcoin season” after the approval of the Ethereum ETF. The bull run is just beginning, but the process may not be as smooth as expected. Here are my observations:
1) The market reaction to the approval of the Bitcoin ETF did not live up to expectations. The anticipated frenzy did not materialize, but the volatility of Bitcoin decreased. The market’s ability to handle Bitcoin strengthened, and the mysterious power of Wall Street became a “safety net” for Bitcoin stability. However, Bitcoin’s pure asset nature lacks comprehensive ecosystem support, causing a disconnect between its secondary market expectations and the primary market being built. In the short term, the “benefits” of Bitcoin on the market cannot extend to the primary investment market, especially concerning the mainstream Ethereum Lego ecosystem market, where the correlation is even weaker.
On the other hand, the approval of the Ethereum ETF will have a significant impact. Firstly, Ethereum’s deflationary nature directly affects the activity of the primary market. The price growth of Ethereum will highlight the advantages of low layer2 gas fees and indirectly drive the development of the layer2 market. With a reduced circulating supply of Ethereum, it will intensify restaking and AVS yield farming, leading to value growth. Ethereum in the hands of incremental funds will be used to invest and support compliant leading DeFi projects, among other things.
If this example seems far-fetched, it is important to understand that Ethereum’s value today is gradually being nurtured by this vast primary market. Conversely, Ethereum’s asset price and circulation will continuously bring users, funds, and talent resources to the industry’s ecosystem. This is the fundamental reason why the Ethereum ETF will drive the arrival of the “altcoin season.”
2) When I mention “altcoins,” I am referring to mainstream coins that have the support of venture capital, a dedicated team, and yet fail to receive significant attention before their token issuance, resulting in a lack of value support post-issuance. In simple terms, the approval of the Ethereum ETF can attract mainstream funds into the vast ecosystem built on Ethereum, driving the continuous growth of valuable tokens. This can potentially break the curse that value tokens cannot surpass meme coins.
However, it is not easy to attract mainstream funds into the ecosystem and stimulate the entrepreneurial ecosystem of Web3. The passing of the “21st Century Financial Innovation and Technology Act” (FIT21) by the US Congress contains significant information. The legislation explicitly aims to provide critical consumer protection and promote innovation in the US digital asset ecosystem. Let’s briefly interpret it:
– The US Commodity Futures Trading Commission (CFTC) gains greater regulatory power, allowing more flexible regulation of digital assets under the “commodity” attribute. This sets the foundation for long-term stability in the policy landscape.
– “Compliance” will become the main theme for the development of the Crypto digital ecosystem. This includes the establishment of institutional systems such as issuance asset processes and standard regulations. Consequently, the virtual asset ecosystem will be divided into two extremes. Those complying with regulations will gradually find solutions to critical issues such as KYC and anti-money laundering, directly benefiting from the ETF boost. Those that do not comply will face increased sanctions and suppression, gradually becoming niche markets (e.g., Tornado). It is worth recalling that in the wave of institutional inflows in 2021, we defined the market as the “year of compliance.” However, unexpected incidents like the FTX and Luna events delayed this wish. The approval of the ETF will ultimately bring the “compliance” issue to the forefront.
– US financial institutions or conglomerates will exert strong influence in critical areas such as stablecoins, exchanges, digital asset custody institutions, and payment platforms. The probability of directly launching a stablecoin in the short term may be low, but indirect control through licensing cannot be ruled out.
3) If the above speculations come true, we can forecast the following:
– In the short term, the crypto secondary market will experience a two-tier split. Some behind-the-scenes manipulators will intensify their efforts to manipulate a series of regulatory acts, resulting in high volatility for meme coins and some mainstream coins, while altcoins will flourish.
– In the medium term, leading DeFi projects, stablecoins, and exchanges will further strengthen compliance efforts. Value targets with good compliance orientation will perform well in the market, while others will gradually lose value support.
– In the long term, the political influence on the crypto market will gradually align with the preferences of the Web2 market, disappointing some adherents of high decentralization ideals. However, positive policy expectations and the friction with regulations are a double-edged sword.
– Web3 native is not a shield for fraud and money laundering under the pretext of decentralization. Under the strong compliance framework, the community will divide, and product stratification will become the trend. Complex technologies and protocols in crypto are difficult to regulate directly, but the market will only align with the most mainstream development path. Ultimately, the choice lies in the market.
In conclusion, it will either be a final celebration for speculators or a gradual pressure from regulatory measures. Each person has their own vision for the development of the crypto market. Overall, the crypto market, driven by politics, will no longer solely pursue the pure dream of decentralization. However, it will allow the market, which has been developing in chaos for years, to eliminate impurities and give mainstream value coins the opportunity to shine.
