The altcoin market is warming up, and the ETF craze is sweeping in.

Recently, the cryptocurrency market has shown an interesting trend. Although Bitcoin has experienced a pullback, alts have welcomed a long-awaited rise. Ethereum has broken through the $3600 barrier, and multiple sectors such as Defi and Layer2 are generally on the rise, indicating that the altcoin market seems to be rejuvenating. This stands in stark contrast to the situation a few days ago when Bitcoin was close to the $100,000 high, while the altcoin market was rather bleak.

In this round of bull market primarily led by institutions, many market participants have not shared in the rising dividends. On the contrary, the alts they hold are continuously being drained by Bitcoin, showing a downward trend. This creates a stark contrast with the fervent promotion of the bull market, leaving participants feeling quite helpless.

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

However, the altcoin market, which has been quiet for a long time, seems to have regained its vitality recently. Last weekend, coins such as SOL, XRP, LTC, and LINK were the first to take off. The daily trading volume of DEX in the Solana ecosystem broke through $6 billion, and XRP once surged to $1.63. This morning, Ethereum broke through $3600 strongly, driving the entire altcoin sector to rise broadly, with the Defi sector increasing by as much as 8.47% in 24 hours.

Analyzing the reasons for the rise of alts, in addition to the optimistic sentiment brought by the overall bull market, the influence of Wall Street cannot be ignored. The launch of the ETF is the most direct manifestation.

Looking back at the starting point of this round of bull market, the launch of 11 Bitcoin spot ETFs ignited a market frenzy. The involvement of Wall Street giants like BlackRock and Fidelity has propelled the mainstream adoption of Bitcoin while significantly lowering the barriers to market participation. After Bitcoin and Ethereum spot ETFs were successively approved, the market began to speculate on what the next token to attract Wall Street's attention would be. Considering market capitalization and capital factors, Solana was once the most favored choice.

On June 27, asset management giant VanEck was the first to submit the S-1 form application for the "VanEck Solana Trust" to the SEC. The next day, 21Shares followed suit. On July 8, the Chicago Board Options Exchange (Cboe) submitted a 19b-4 filing for the Solana ETFs of these two companies, bringing the hype around the SOL ETF to a climax.

However, the SEC's tough stance quickly cooled the altcoin ETFs. In August, rumors in the market suggested that CBOE had removed the 19b-4 applications for two potential Solana ETFs from the "Pending Rule Changes" page of its website, and analysts believed the chances of approval were slim.

As of today, the market environment has undergone significant changes. On November 22, documents from the Cboe BZX Exchange revealed that the exchange proposed to list and trade four Solana-related ETFs on its platform. These ETFs are initiated by Bitwise, VanEck, 21Shares, and Canary Funds, and are classified as "commodity-based trust shares." If the SEC officially accepts the application, the final approval deadline is expected to be in early August 2025.

In addition to Solana, more altcoin ETFs are also in preparation. In the past month, crypto investment firm Canary Capital submitted spot ETF applications for three coins: XRP, Litecoin, and HBAR to the SEC. According to ETF Store President Nate Geraci, at least one issuer is currently attempting to apply for an ETF for ADA (Cardano) or AVAX (Avalanche).

The intensive applications for altcoin ETFs have sparked widespread discussion, and the expectation of future capital inflows has further excited the market. Is the wild west era of crypto ETFs really about to arrive?

From an objective perspective, reviewing the approval process of Bitcoin and Ethereum, the approval of cryptocurrency spot ETFs generally needs to meet two major implicit requirements: first, it must not be explicitly defined as securities by the Securities and Exchange Commission (SEC); second, there must be leading indicators to prove the market's stability and non-manipulability, with typical characteristics being that tokens can be traded on the Chicago Mercantile Exchange (CME), meaning they must first be listed on the futures market. According to this standard, apart from Bitcoin and Ethereum, there currently seems to be no token in the crypto market that fully meets the conditions. For more centralized currencies, the approval difficulty is even greater, especially for SOL, which not only has a high degree of centralization but was also explicitly listed as a security in the SEC's accusations against a certain trading platform.

Nevertheless, the market remains optimistic about the ETF approvals for SOL and XRP. Bloomberg ETF analyst James Seyffart believes that the decision timeline for the approvals of SOL, XRP, LTC, and HBAR ETFs may be extended to the end of 2025, and the SEC might approve an ETF related to Solana within the next two years. ETF Store President Nate Geraci is even more optimistic, believing that the Solana ETF is likely to be approved before the end of next year.

The optimistic sentiment is backed by information, with the core factor pointing to the soon-to-be-inaugurated Trump. Trump's commitment to cryptocurrency is gradually being fulfilled, and changes in the internal and external regulatory environment have given the cryptocurrency industry stronger confidence.

From the perspective of industry regulation, the main regulatory body for cryptocurrencies, the SEC, is about to undergo personnel changes. The current SEC chairman has announced that he will resign on January 20, 2025, the day Trump officially takes office, putting a pause on the SEC's strict regulation in recent years. According to statistics, during his tenure, the SEC has taken enforcement actions against multiple cryptocurrency-related entities, completing thousands of cases and recovering approximately $21 billion in fines.

Although the next SEC chairperson has not yet been determined, there are reports that a former SEC commissioner may take over. Against the backdrop of an intensifying battle over whether cryptocurrencies are securities or commodities, there are also rumors that the Trump administration hopes to expand the powers of the Commodity Futures Trading Commission (CFTC) to strengthen its regulatory authority over the digital asset space. If this move is realized, the likelihood of crypto assets being classified as securities may decrease.

From a broader external perspective, Trump's new administration has gathered many cryptocurrency supporters. Among all the candidates for cabinet ministers, in addition to some well-known names in the market, there are several members who are crypto supporters, some of whom actually hold cryptocurrencies, and some are even super fans of Bitcoin.

It is evident that the composition of this government is quite different from the previous one. Since many of the higher-ups are supporters, the regulation of cryptocurrencies is bound to be more lenient. If a comprehensive regulatory framework for crypto assets can be established during this government's term, the regulatory direction for the industry in the future will also be clearer.

Outside of regulation, Trump’s enterprises have long targeted business opportunities and have recently been very active, aiming to expand their presence in the crypto industry through investment and financing. Reports indicate that a company under Trump is negotiating with an exchange to acquire a cryptocurrency exchange. Additionally, the company has submitted an application for a cryptocurrency payment service named Truth Fi, planning to enter the crypto payment sector. These corporate movements reflect the President's positive attitude towards cryptocurrencies.

It is precisely based on the above factors that the market has reignited hope for alts ETF. With the change of SEC chairman, the rhetoric surrounding alts as securities may temporarily pause, laying a preliminary foundation for the realization of the ETF.

On the other hand, even though the prospects for altcoin ETFs are difficult to predict, Wall Street is unwilling to give up this massive market worth over $30 trillion. Traditional institutions are building new investment products and derivatives around crypto assets to facilitate investors in incorporating crypto assets into their portfolios.

Sui Chung, the operator of a cryptocurrency index provider, stated that mainstream investors will establish direct ordinary exposure through spot Bitcoin ETFs, while also customizing their exposure to the asset class through additional products. Among them, the most popular products include those involving commodity futures linked to cryptocurrencies that earn yields, as well as products providing downside protection through options. Currently, the company is planning to launch Bitcoin options for a certain index.

John Davi, the Chief Investment Officer of Astoria Portfolio Advisors, also mentioned that he is currently considering increasing Bitcoin exposure in the ETF model portfolio he manages.

Overall, although achieving altcoin ETFs remains challenging under the current regulatory environment, from a long-term perspective, with regulatory easing and increasing investor interest, it will become an inevitable trend for institutions to conduct in-depth research on crypto assets due to considerations of traffic acquisition and market competition. On the product side, institutions will no longer be limited to Bitcoin and Ethereum; the productization and standardization of crypto assets will be further strengthened, and derivatives may experience a boom, aiming to clear obstacles for investors to enter the market. It can be anticipated that investors will have more ways to invest in products related to cryptocurrencies.

In addition to the new products that have not yet been launched, existing ETFs will also benefit from this trend. Taking the Ethereum spot ETF as an example, its capital inflow has long been weaker than that of Bitcoin. As of November 27, the net capital inflow for the Ethereum spot ETF was approximately $240 million, while the net inflow for the Bitcoin spot ETF reached as high as $30.384 billion, showing a huge gap between the two.

There are multiple reasons for this gap. Ethereum inherently differs from Bitcoin in terms of value stability and positioning. Additionally, the rejection of its core staking function has also weakened investor enthusiasm. From a cost perspective, directly holding ETH can yield about 3.5% in staking rewards, while holding an institutional ETF not only does not provide this risk-free return but also incurs management fees ranging from 0.15% to 2.5%.

However, with the changes in regulatory authorities, Ethereum spot ETFs may no longer be unrelated to staking in the future. After all, the previous firm opposition to staking by regulators has changed, and there are already precedents in the European market. Recently, a European ETP issuer announced the addition of staking functionality to its Ethereum core ETP product.

However, despite the optimistic outlook for ETFs, actual capital inflows remain to be seen. Even Ethereum's appeal to traditional capital is relatively limited, with the total assets of the Solana Trust under a certain institution amounting to only $70 million. The purchasing power for altcoins seems to be less optimistic than anticipated. As a result, the head of the digital asset division of a large asset management firm has stated that the company is not very interested in other crypto products aside from Bitcoin and Ethereum.

Regardless of how the subsequent approvals progress, the speculation surrounding the altcoin ETF has already begun, which is undoubtedly a shot in the arm for the long-dormant altcoin market.