Is the approval of Bitcoin ETF a positive or negative thing? What are the substantial short-term and long-term impacts?
The market is always affected by the emotional nature of funds, and all directions are based on overwhelming consensus. When an event occurs, people tend to overestimate its short-term impact and underestimate its long-term impact, or misjudge it due to information asymmetry. So, rationally from multiple perspectives, what impact does the passage of spot ETFs bring?
Good news only leaves bad news? Not necessarily
In the past, there was always a popular saying that "good news comes true" and only bad news remains. The approval of the Bitcoin spot ETF is a long-awaited major positive news. In fact, in general, most of the expectations have been released before they are implemented, which can also be seen from the strong performance of Bitcoin in the past year.
But if we say that good news is bad news, it is not necessarily so. In addition to short-term profit-taking and callbacks, we have actually seen that the trading volume of about 4.6 billion US dollars on the first day of the opening of spot ETFs is quite impressive compared to various newly opened ETFs before, which is in line with the previous expectation of new capital inlet of traditional financial channels, and will form a strong new buying force over time.
The crypto market has a new indicator
In fact, there is a very similar reference for Bitcoin spot ETF, which is gold ETF. Taking the world's largest gold ETF "SPDR Gold Trust" as an example, because its holdings account for a large proportion, it is usually used as a data basis for judging the trend of gold prices based on whether it increases or decreases its holdings of gold, which is highly indicative.
Judging from the hundreds of thousands of BTC held by GBTC in the past, it is expected that the Bitcoin spot ETF will only increase and not decrease. Gradually, like the gold ETF, daily rebalancing will become one of the major indicators of the crypto market and affect the direction of the crypto market. Therefore, the following historical laws of the impact of gold ETF holdings on gold prices are of reference significance:
The trading volume increases, the ETF gold holdings decrease, and the price rises, indicating that the price may fall soon;
As trading volume increases, ETF gold holdings and prices fall, and prices may turn to rise;
Trading volume, ETF gold holdings increased, and prices rose, suggesting that prices may continue to rise;
Trading volume, ETF gold holdings increased, prices fell, and prices may fall in the short term;
Trading volume, ETF gold holdings decreased, prices fell, and prices may continue to fall in the short term;
Trading volume, ETF gold holdings decreased, and prices rose, suggesting that prices will rise in the short term and may fall back soon;
Similarly, when the Bitcoin spot ETF holdings reach a certain share, it will have a similar impact on the crypto market.
Beware of Grayscale GBTC conversion to ETF
Among the 11 approved spot ETFs, most of them are just entering the market and are in a net buying state, while Grayscale's GBTC is definitely a counterexample. This is because the Grayscale GBTC Trust has been in a negative premium for a long time in the past. Some investors have been holding more than 600,000 positions for quite a long time. After a round of bear market, it is understandable that many people choose to take profits. Therefore, we will see short-term capital outflows from GBTC, and the amount is not small.
But for now, fortunately, the inflows of other spot ETFs far exceed the outflows of the "traitor" GBTC. Eric Balchunas, an ETF analyst at Bloomberg, wrote on the X platform that in the two days since the Bitcoin spot ETF was listed, nine issuers have absorbed $1.4 billion in funds, exceeding GBTC's outflow of $579 million, with a total net inflow of $819 million.
Next, will the market focus shift to Ethereum spot ETF?
Ethereum ETF Expectations
Regarding the sudden rise in Ethereum's market before and after the approval of Bitcoin ETF, many people explained that funds began to pay attention to the next Ethereum spot ETF that has been applied for and is about to be approved. These funds include funds that have already realized profits and those that did not get on board with the expected market of Bitcoin ETF in this round. They hope to "get a piece of the pie" through the expected market brought by Ethereum ETF.
This type of strategy is very common. When a positive asset is realized, the short-term expectation of similar assets will rise immediately. So how long can the Ethereum ETF be expected to last? The Ethereum ETF that BlackRock applied for will get a response in May at the latest. Will it be delayed like Bitcoin by then?
At present, the US SEC's attitude towards crypto assets such as Ethereum is that it currently regards Ethereum as a vague area between commodities and securities. In other words, it has neither accurately positioned Ethereum as a commodity like Bitcoin, nor has it completely determined that Ethereum is a security. Previously, the SEC almost made it clear that Ethereum is not a security, but this was mainly due to the new changes caused by Ethereum's switch from the POW consensus mechanism to the POS consensus mechanism.
In addition, for Ethereum ETF to be approved, it needs to be not easily controlled by certain institutions like Bitcoin, which is a relatively strict condition. The reason why Bitcoin ETF can be approved is that the share of the world's largest trading platform has decreased, and the other is that there are too many institutions (capital) applying for ETF. If it is not approved again, it may lead to lawsuits.
In general, fortunately, there are still a few months before the Ethereum ETF, which is enough time for Ethereum to gain market attention. There is no need to worry too much about the negative impact of failure or postponement, but the probability of approval may not be high.
The main variables are whether the US SEC has a more sufficient understanding and confidence in the POS version of Ethereum, and whether the external pressure from large financial institutions driven by the interests of various investors can be in place. This depends on whether the Bitcoin spot ETF can operate stably. If the overall performance of the crypto market is good and brings strong interest from global investors, capital, driven by interests, will be happy to promote the passage of the Ethereum spot ETF.
Ethereum’s medium- and long-term expectations are not ETFs
In fact, compared to the short-term focus on whether the Ethereum spot ETF can be passed, what is more worthy of attention for Ethereum is its series of upgrades, including the most recent major upgrade "Cancun". Ethereum is still the largest application ecological infrastructure in the crypto industry. Compared with the Bitcoin ecosystem, the Ethereum ecosystem has come a long way, with better infrastructure and better deployment solutions. Now Layer2 has been successfully implemented and stably adopted, and Layer3 is also about to be launched. In general, the Ethereum ecosystem has actually begun to prepare for the deployment of large-scale applications in various tracks. Large-scale applications are also likely to be one of the main foundations for the arrival of the next big market.
There are still differences between Ethereum and Bitcoin. The most important attribute of Bitcoin is the concept of "data gold" as an asset, so ETF is very important to it, while Ethereum comes from the empowerment of innovative application value. In the medium and long term, the expectations of Ethereum mainly come from its innovation. After the Cancun upgrade, there will be more important innovation upgrades on the way. Therefore, compared with paying attention to the Ethereum ETF, we can actually pay more attention to its subsequent technological innovation and upgrades.
10 Development Trends of Cryptocurrency and Blockchain in 2024
1. After the Bitcoin spot ETF is approved, it may bring in 30B+ incremental funds
The listing of Bitcoin spot ETF will not only bring in potential investors from mainstream stock markets such as Nasdaq, NYSE, and CBOE, but also facilitate the entry of more institutions. Combined with the management scale of existing Bitcoin-related products on the market, it is conservatively predicted that Bitcoin spot ETF will bring in 30B+ incremental funds.
2. The total market value of inscriptions in the Bitcoin ecosystem may reach 20B+, and only the top MEMEs with real Fair Launch have a medium- and long-term consensus
Fair Launch is the core engine of the early stages of every round of Crypto bull market in the past. The inscriptions of the Bitcoin ecosystem are classified into Ordinals, Atomicals, Runes, PIPE, Taproot Assets, etc. according to the asset issuance protocol. The differences and advantages and disadvantages of these protocols are not elaborated here. From the perspective of MEME coin, these inscriptions in the early stages are only the real Fair Launch head MEME with medium- and long-term consensus.
3. Bitcoin Layer2 will usher in rapid development, which is beneficial to Bitcoin ecological application-based Infra
Since ordinarys NFT and BRC20 have attracted widespread attention from the market, many Bitcoin Layer2 financing projects have appeared in the second half of 2023. Some adopt client verification, which may be more Bitcoin Native; some adopt Rollup, which may develop faster based on the years of development of Ethereum Rollup. The development of Bitcoin ecology and its layer2 is conducive to the infrastructure of Bitcoin ecology. For example: Bitcoin ecological wallet Xverse, etc.; Bitcoin Layer2 Lightec and its zkBridge and WrapBTC, etc.
4. Ethereum Layer2 TVL will surpass Ethereum Layer1 and may reach 100B+
Ethereum Layer1's TVL is mainly contributed by the LST protocol. As of now, more than 28.6 million ETH have been staked. Because of the liquidity staking protocols such as Lido (stETH), Alluvial (LsETH) alluvialfinance, the liquidity of Staked ETH has been released again, resulting in more use cases based on LST, such as perpetual contracts and ReStaking with LST assets as collateral. Effectively improve the capital utilization rate of ETH.
As various Layer2 projects are launched on the mainnet one after another, various dApps have migrated their main battlefield from Ethereum Layer1 to Layer2, which has lower gas fees and faster speeds. In 2024, the TVL of Layer2 may be higher than that of Layer1.
5. ZK Rollup’s TVL volume is still not comparable to Optimistic Rollup, but the zk-type modular combination of Ethereum Layer2 Components will be more complete
The development of ZK Rollups and its supporting Components is becoming more and more sophisticated. In the past one or two years, various zk projects focusing on specific vertical segments have emerged, such as ZK co-processor, proof marketplaces/ZKProver (Risczero), zkDevOps, Hardware Accelerators (Ingonyama), zkOracle (Hyper Oracle), etc. The trend of modular combination of zk-type components will help lower the threshold for developers to build zkDApps and provide greater flexibility.
6. Layerzero will issue tokens in the first half of the year, which is expected to ignite the Omnichain track
Layerzero already supports 54 chains, with more than 96 million cross-chain messages and more than 35,000 full-chain applications in the ecosystem. According to Layerzero's official tweet, it will issue tokens in the first half of 2024, which is expected to ignite the market trend of the Omnichain track.
7. Parallel EVM’s new narrative will drive the secondary growth of Sei v2 and other chains
Parallel EVM is a way to make blockchain networks faster and more efficient by running multiple (non-interfering) transactions at the same time. There are several major projects trying to use Parallel EVM. Taking Sei Network as an example, Sei v2 proposes a major upgrade of parallel EVM. Sei v2 will create a new component to support EVM smart contracts, which can also interact with existing Cosmwasm smart contracts. The Sei v2 chain will optimistically run all transactions in parallel. When there are conflicting transactions (interfering with each other), the Sei blockchain will track the storage parts touched by each transaction. Transactions involving different parts of the storage will be re-run in parallel, and transactions involving the same state will be re-run in sequence.
In addition to Sei v2, projects such as Neon EVM and Nomad are also using Parallel EVM to improve performance. At the same time, EVM is still the most popular DApp environment. These chains support Parallel EVM and can enjoy many infrastructure tools of the EVM ecosystem.
8. The market size of DePIN may grow 10 times
DePIN is an essential infrastructure for realizing the true meaning of Web3. It is a security fortress for the robustness of Web3 network for Web3 and Crypto projects. According to Depinscan statistics, the current Market Cap of the DePIN sector is about 62 billion US dollars, and there is still a lot of room for growth. Among them, Solana ecosystem has many projects in the DePIN track that are more concerned by the market, including Helium, Render Network, Hivemapper, Shadow, Media, etc.
The Depin narrative did not become a track hype in the last round. This round is still the narrative of Web3's economic incentives to lead Web2. The track that did this in the last round was GameFi: you get tokens for playing games and running.
The Depin narrative has a wider audience. You can get tokens for charging, making phone calls, using water, etc. Everything can be Depinned. Who makes money? Early participation. Who takes over? Later price investment.
9. Autonomous World / Fully onchain games with strong social attributes may emerge
The FT/NFT assets, state storage, and logic execution of full-chain games are all on the chain, with the characteristics of decentralization/community autonomy, no permission required, and composability. Compared with traditional games and non-full-chain games, there are two key advantages: one is that the player's game assets are long-term and safe; the other is that the game mechanism is transparent and credible. The game itself is relatively lightweight, but Fully on chain games with strong social attributes and high playability may have a small outbreak, and may attract market attention with social fission and gambling characteristics.
10. There will be star cases of AI and Crypto integration in multiple application scenarios
The integration of the most advanced productivity and the most equitable production relations will jointly shape a new lifestyle for the future of mankind. In 2024, there may be two scenarios for the combination of AI and Crypto: Using Bitcoin as payment currency for AI may be the basic rule of the future AI world. Setting up AI Agent/AI Bot to automatically perform various tasks and access various resources, in the process using crypto infrastructure and BTC for automated payments.
Use ZKML for sensitive data training and machine learning model evaluation. Use ZK to solve the privacy protection issues of AI models/inputs and the verifiability of the reasoning process, thereby ensuring the correctness of machine learning reasoning. Based on ZKML, smart contracts can be used to safely schedule AI models, thereby supporting more application logic and scenario exploration.
Is it still too late to get on the bus now?
It is definitely not in time. As for how much you will earn in the end, it does not entirely depend on when you get on the bus. On the surface, getting on the bus now is far less than last year, but it may not be less than those who got on the bus last year. Otherwise, you can ask how many people made money with such a big increase last year, and even how many people outperformed the growth of the big cake. How much you earn depends more on getting off the bus, which is the two key years of 2024-2025. Don't worry about getting on the bus, how to get off is crucial.
Next short-term and mid-term layout:
ETH Cancun upgrade + BTC halving in April is an excellent opportunity window. BTC halving expectations will ferment in advance, basically in the second half of this year.
ETH+BTC—the two most core coins—the two most important nodes—their timelines overlap, so which coins should we pay attention to in the second half of this year?
There are only a few ETH Cancun upgrade concept coins that can be foreseen, which can be roughly divided into three categories:
1. L2 chain coins: ARB, OP, METIS; L2 vertical chains: LRC, IMX, DYDX;
2. L2 applications: GMX, MAGIC, RDNT of Arb series, SNX, VELO of Op series
3. The most dynamic new coins in the last round, NFT trading - BLUR; BRC20 - ORDI; MEME - PEPE, education - EDU: new public chain - SUI APT
4. There is no need to say more about Blur. It was born at the wrong time. A large number of them have been unlocked recently, and the price has been falling. However, it wins in terms of its unbeatable basic foundation and NFT market share. As long as NFT does not die, Blur will surely have its highlight moment after the wash.
5. ORDI, PEPE and other tokens with MEME attributes will be the best tokens to receive liquidity overflow once market liquidity rises again.
6. AI concept: GPT5 will be released by the end of the year, which will be a good emotional trigger point. The leader AGIX and FET are the focus.
7. SSV - After the ETH2.0 upgrade, we can see that the staked amount has been rising steadily regardless of market fluctuations. If the market shows signs of recovery, we can immediately start to lay out this sector. Focus on SSV RPL,
8. Production cut by half - DASH ZEN ZEC production cut: The focus is still on ZEN! Small market value, high return! The key is strong market control!
The new year has begun, and we are creating a high-quality circle, which mainly explains various basic industry knowledge of the currency circle, the rotation of hot sectors, the basic methods of identifying tops and bottoms, how to better grasp this bull market, and so on. If you are interested, you can contact me.
