This is a bull market for ETFs

Author: Rhythm BlockBeats

On June 27, Matthew Sigel, head of digital asset research at VanEck, announced that they have applied to the SEC for a Solana ETF.

This new fund, named VanEck Solana Trust, is the first Solana ETF applied for in the United States. He stated: "The native token SOL functions similarly to other digital commodities like Bitcoin and Ethereum, used for paying transaction fees and computing services on the blockchain. Like ETH on the Ethereum network, SOL can be traded on digital asset platforms or used for peer-to-peer transactions."

Bloomberg ETF analyst James Seyffart posted on social media that the Solana ETF is coming "earlier than expected," but the approval rate remains uncertain. Regardless of whether it gets approved, this is enough to excite the dormant crypto community, as this round of the market can be described as an ETF bull market.

"Bitcoin's Solo Bull"

After the approval of the spot ETF, BTC, as a representative of digital assets, became the first "logically sound" asset in the crypto space.

The Bitcoin spot ETF provides Wall Street with a legitimate channel to allocate crypto assets, bringing a significant amount of off-exchange funds into the crypto market. Key points in Bitcoin's price rise indicate that the surge from $25,000 to a new high of $69,000 was almost entirely driven by the ETF, whether through legal victories or fake news; the stimulation from news has always influenced the market.

On August 30, 2023, Grayscale won its lawsuit against the SEC, overturning the SEC's decision to block Grayscale's ETF. With the fake news about the approval of Bitcoin spot ETFs in October, Bitcoin stabilized at $34,000. On January 11, the SEC simultaneously approved 11 spot Bitcoin ETFs, and on that day, Bitcoin's price surged to $48,590.

After the Spring Festival, Bitcoin entered a frenzied upward trend, surpassing the $69,000 mark, with a market cap reaching $1.35 trillion, surpassing Meta Platforms to become the 9th largest mainstream asset globally.

Data shows that from January 21 to 26, the total assets under management of Bitcoin ETFs dropped from $29.16 billion to $26.06 billion in just five days, losing over $3 billion. However, starting in February, the total assets under management of Bitcoin ETFs steadily increased from $28.3 billion, breaking through $40 billion in less than a month.

With a large influx of funds, Bitcoin's price experienced a significant surge. Throughout February, Bitcoin saw the largest price fluctuations in history, with each Bitcoin's price increasing by $18,615, which is higher than Bitcoin's value 15 months ago.

In contrast, altcoins struggled to keep up with BTC's rise. The major positive news for the Ethereum ecosystem, the Cancun upgrade, was diluted, while Solana made a dazzling debut with meme coins. However, this led to the emergence of pre-sales, celebrity coins, and other factors that continuously disrupted market trends. Additionally, the rise of pump-and-dump schemes further divided market attention, pushing crypto VCs into opposition with retail investors due to the high profits from memes and airdrops.

Meanwhile, the Bitcoin ecosystem, led by RUNE, has been developing strongly. Due to the lack of a clear business model and asset logic, many believe this cycle is Bitcoin's "solo bull."

BlackRock Wants, BlackRock Gets

If one had to find a reason for the start of this bull market, it would undoubtedly be BlackRock. In the context of a deep bear market and high regulatory pressure on the industry, BlackRock's ETF single-handedly turned the tide of the crypto market.

After the launch of the Bitcoin spot ETF, IBIT was also the strongest performer with the best liquidity. Last week, HODL15Capital listed BlackRock's IBIT as the top holder of Bitcoin among the ten largest companies globally, with 305,614 BTC.

A saying circulates on Wall Street: "BlackRock Wants, BlackRock Gets." As a financial giant managing $10 trillion in assets, the SEC seems to have to yield to BlackRock.

What many fail to see is that the launch of the Bitcoin spot ETF may just be an appetizer for the financial giant's layout in the tokenized world.

At the end of 2022, BlackRock CEO Larry Fink stated: "The next generation of markets, the next generation of securities, will be the tokenization of securities." BlackRock's entry into Bitcoin indicates a much larger strategy than we might think. Subsequently, we saw BlackRock launch the dollar-denominated institutional digital liquidity fund BUIDL on Ethereum.

On April 30, BlackRock, in collaboration with Securitize, launched the first digital asset fund BUIDL, which quickly topped the charts, capturing nearly 30% of the total $1.3 billion digital treasury market in just six weeks.

Since the beginning of this year, the market value of tokenized U.S. Treasury bonds has significantly increased, with tokenized RWA (including Treasury bonds, bonds, and cash equivalents) growing by 35% in the past two months. Leading this growth is BlackRock's BUIDL, which has increased by 65% since the beginning of this quarter, pushing the total market value of tokenized Treasury bonds to over $1.5 billion. During the same period, the total locked value of Ondo Finance, one of the leading RWA-focused DeFi protocols, increased from $221 million in April to $507 million.

Less than a month after the launch of BUIDL, the Ethereum spot ETF, which had regulatory issues related to staking, experienced a dramatic turnaround, with a single application being approved.

On May 24, the Ethereum spot ETF's approval rate skyrocketed from a mere 7% to 75% overnight, with ETH prices repeatedly breaking through the $3,800 mark.

After Ethereum transitioned to a new governance model called "Proof of Stake (POS)" in September 2022, the SEC launched an investigation into the Ethereum Foundation based in Switzerland. "Proof of Stake" effectively provided the SEC with a new excuse to attempt to define Ethereum as a security.

As a compromise, companies like BlackRock that applied for ETFs removed the staking component from their ETF proposals, stating they would not stake any part of the trust's assets. On May 30, BlackRock further stated in a filing with the SEC that it would purchase $10 million worth of ETH to fund its Ethereum ETF.

With BlackRock's three-pronged approach, many difficulties faced by the industry due to the SEC over the past year have begun to be resolved. The big brother leads the charge, followed by a series of smaller players joining in, with BlackRock bringing countless institutions into the market, marking a new phase in the mainstreaming of "crypto logic / crypto terminology."

Altcoins, Can ETF Funds Also Support Them?

Whether there will be an altcoin bull market has been a topic of discussion in the crypto space for the past six months.

On one hand, VC funding is substantial, and the influx of new retail investors has not met expectations, making it difficult for funds to support new coins and the old coins still surviving in the market. This has led to project valuations rising primarily in the primary market, with high FDV and low circulation occurring after tokens go live. Additionally, due to the saturation of applications in the previous bull market, leading to "overloaded" block space, VC funding during the bear market has primarily focused on infrastructure, causing the development of the application layer, which users perceive most acutely, to lag behind, presenting a "narrative poverty" issue when the market suddenly welcomes a rally.

Ultimately, what everyone is most concerned about is whether the money coming from Bitcoin ETFs will flow into altcoins.

In the previous cycle, crypto institutions pushed overall crypto market growth by collateralizing BTC and leveraging those funds into the altcoin market, leading to what was termed an altcoin bull market. However, this cycle's logic has clearly changed; spot ETFs are managed by custodians and cannot be leveraged, which directly kills an important source of funds for the altcoin market.

However, the recent developments regarding ETH and SOL spot ETFs have brought new and clearer logic for attracting and creating liquidity in the crypto industry, indicating that ETF funds will not only benefit Bitcoin but can also support altcoins.

The next question is whether consumers in the capital market will pay for crypto assets other than Bitcoin.

In the short term, this may be challenging, as the general perception of cryptocurrencies remains Bitcoin. Concepts such as the differences between smart contracts, Ethereum, and Solana will take time to digest, but this is precisely where the opportunity lies for institutions like BlackRock (packaging crypto indexes).

Conversely, the entry of traditional institutions may gradually squeeze the market of many crypto-native institutions, especially roles like market makers and OTC, as the regular army can bring in funds but can also take away your job.

In summary, regardless of whether the SOL ETF gets approved or how the ETH ETF performs in the future, the logic and trend of the ETF bull market seem to have arrived and are unstoppable.