With the departure of Gary Gensler as head of the Securities and Exchange Commission (SEC), we already saw a new dawn with regards to crypto by the agency. This is culminated by the Senate approval of Paul Atkins, the SEC is likely to adopt a pro-growth stance on the industry.
That is not to say Gensler did not have some success. Overall, he was a major net negative for cryptocurrency. One positive was the approval of spot ETFs. Thus far, only Bitcoin and Ethereum received approval.
It is something that is going to change, and likely in a rapid fashion.
According to reports, there are applications for 72 crypto ETFs. The approval of a couple dozen of these could really change the entire landscape of cryptocurrency.
Longtime crypto advocates might scoff at the notion of ETFs benefitting the industry. After all, this is only feeding the enemy crypto was meant to take on. The thought is crypto was designed to overtake the bank, to replaced the existing financial system.
Instead, entities like Blackrock are enriching themselves by offering crypto related products, like ETFs, that grow their asset base.
From this perspective, it is hard to argue with the logic. This is only providing more power to institutions that repeatedly have shown themselves to be not worthy of trust. Placing financial intermediaries between crypto and its owners is counter to the fundamentals which the industry was built upon.
Nevertheless, it is where we are at.
My view is the green candle crowd reigned supreme from the early days. Perhaps the first wave have values, but after that, it was the easy money crowd that took over.
This gave Wall Street its signal to dive in. Perhaps the only thing holding them back is the present lack of regulations within the United States. Once that happens, the floodgates will open.
Eric Balchunas, Bloomberg's Senior ETF Analyst, highlighted on his X post on Tuesday that 72 crypto-related ETFs, covering major cryptocurrencies like XRP, Litecoin, and Solana, as well as niche assets like 2x Melania (MELANIA) and Dogecoin (DOGE), are awaiting approval from the US Securities and Exchange Commission.
The wide range of proposed ETFs – from leveraged funds to meme coin exposures – highlights the speculative appetite driving crypto markets, as firms like Tuttle Capital push the limits of what regulators may allow in pursuit of investor demand.
It is hard to say what will get approves. My guess is the SEC will be rather conservative. It will allow many ETFs to go through but some of the "wilders" ones might be denied.
In other words, there will be some sensibility.
So what are the benefits to having ETF approval?
As we saw with Bitcoin, there is buy demand for the underlying asset. Each unit of an ETF is tied to the base, in this case either Bitcoin or Ethereum. When we look at the market cap, Bitcoin ETFs have 5.7% of the total whereas Ethereum comes in at 2.77%.
ETFs do open up crypto buying. For example, retirement accounts such as IRAs or pension funds can purchase shares in ETFs whereas they are prohibited from holding crypto directly.
Another benefit is liquidity. Anyone who owned a penny stock or a crypto with little trading volume will understand this.
When you are sitting on a pile of money in an asset, it is of no use if the asset cannot be sold. Often, with low liquidity, one will start selling and crash the price. This means the value of the asset is a fraction of what it said in one's account.
ETFs help to bring a great deal of liquidity to the markets. Bitcoin and Ethereum are likely not problems. However, some of the other coins on the list could see a great deal of benefit. For example, could someone buy $250M or $500M worth of Solana? This seems like a large number until we consider what institutions do.
With a trading volume of about $6.5 billion, orders of this size would have an impact.
ETFs can add 10% or 20% to the trading volume without breaking a sweat.
The final component comes when layering. For example, there could be ETFs which provide a mixture of coins, designed to offer differing benefits.
There were already applications for Bitcoin-Ethereum ETFs. We could see that with a mixture of crypto. Then we have leveraged, inverse, and a host of other financial tactics that traders like to employ.
Ultimately, this will benefit crypto, at least according to the green candle perspective.
