How to view the industry development trend after the approval of the Ethereum ETF? Let’s start with the conclusion: In my opinion, the market will usher in a long period of “altcoin” season, the bull market Bull Run is just right, but the process will not be so smooth. Why? Next, let me share my personal observations:
1. The market response after the approval of the Bitcoin ETF was not as grand as expected. The anticipated frenzy did not come as expected, but the volatility of Bitcoin has decreased significantly. The market’s capacity to absorb has been strengthening, and the mysterious power of Wall Street behind it has become the “bottom support” for the stabilization of Bitcoin.
Because Bitcoin has pure asset properties and lacks a complete ecological support system behind it, the expectations of Bitcoin in the secondary market seem to be disconnected from the primary market that everyone is building. In the short term, the “gain” effect of Bitcoin on the market cannot be extended to the primary value investment market, especially weakening the relevance to the mainstream Lego ecosystem market of Ethereum.
However, the approval of the Ethereum ETF is different. On one hand, the deflation of ETH will directly affect the activity of the primary market, the price growth of Ethereum, the advantage of low layer2 Gas fees will be highlighted, indirectly driving the development of the layer2 market. The reduction of Ethereum circulation will intensify the internal competition of Restaking and AVS income tracks, driving value growth. Ethereum held by incremental funds will be used to invest and support compliant top DeFi projects, and so on.
If these examples seem far-fetched, just understand that the value of Ethereum today is gradually nurtured by this huge primary Build market behind it. Conversely, Ethereum’s own asset price and circulation audience will continuously bring users, funds, and talent resources to the industry ecosystem. This is the fundamental reason why the Ethereum ETF is more likely to drive the arrival of the “altcoin season”.
2. When I talk about “altcoins” here, I am more referring to some “mainstream coins” with VC support, team Build, and lack of market attention before the token issuance. Simply put, the approval of the Ethereum ETF can attract mainstream funds to enter the vast ecosystem built around Ethereum, driving the continuous growth of value coins. (Can this break the curse that value coins are not as good as MeMe coins?
However, idealism is beautiful, and it is not easy to attract mainstream funds to enter the ecosystem and drive the entrepreneurial ecosystem of web3. The passage of the “21st Century Financial Innovation and Technology Act” by the U.S. Congress, known as FIT21, carries a lot of information. This law explicitly states the need to provide key consumer protection and promote innovation in the U.S. digital asset ecosystem. A brief interpretation:
1. The CFTC, the U.S. Commodity Futures Trading Commission, has greater regulatory power, and digital virtual assets will be more flexibly regulated under the “commodity” attribute, laying the foundation for long-term stability with fewer variables on the policy side;
2. “Compliance” will become the main theme of the development of the Crypto digital ecosystem, including the establishment of institutional systems for the issuance of assets, processes, and standard specifications. This means that the virtual asset ecosystem will be divided into two extremes:
Those compliant with regulations will gradually find solutions to key issues such as KYC, anti-money laundering, and will directly gain ETF benefits. Those not compliant will face increased sanctions and crackdowns and gradually return to niche markets (such as Tornado). Remember, in the institutional influx of 2021, we defined the market as the year of compliance, but the unexpected events of FTX and Luna have delayed this wish. Ultimately, the approval of the ETF, the “compliance” issue still needs to be addressed.
3. The U.S. government or financial conglomerates will intervene strongly in key areas such as stablecoins, exchanges, digital asset custody institutions, and payment platforms. The probability of directly stabilizing coins through direct legislation in the short term is low, but there is the possibility of indirectly controlling the market through methods such as issuing licenses.
3. If the above speculations come true, it can be foreseen that:
In the short term, the Crypto secondary market will be differentiated into two levels. Some behind-the-scenes institutions will intensify speculation before a series of regulatory laws are enacted, and MeMe coins and some mainstream coins will experience high volatility, while altcoins will flourish;
In the medium term, some leading DeFi, stablecoins, and exchanges will increase compliance efforts, and value targets with good compliance orientation will have a good market performance, while others will be the opposite and gradually lose value support;
In the long term, the political color of Crypto will gradually cater to the taste preferences of the web2 market, which may disappoint some adherents of highly decentralized purism, but expect positive policies. and being rubbed on the ground by policies is a double-edged sword.
Web3 natives are not operating under the guise of decentralization to commit money laundering protection. Under the big stick of compliance, community differentiation, and product stratification are the general trend. Some very complex technologies and protocols in Crypto are difficult to control by regulations, but the market will only follow the most mainstream path of development. (The choice actually lies in the market.
In conclusion, whether it is the final frenzy of speculation, the gradual pressure of regulatory swords, or the loss of speculative crowd due to constrained high volatility, everyone has their own vision of Crypto development. In general, the Crypto market under political influence will no longer maintain the pure “decentralized” dream of the past, but it can eliminate the impurities of the haphazard development of the Crypto market for many years and allow mainstream value coins to shine.
