How to view the future impact of Ethereum ETF

Author: Hao Tian

How do you view the changes in the future development of the industry after the approval of the Ethereum ETF? First of all, let me say the conclusion: In my opinion, the market will usher in a relatively long "copycat" season, and the bull run is just in time, but the process will not be so beautiful. Why? Next, let me share my personal observations: 1) The market response after the passage of the Bitcoin ETF was not as grand as expected. The wild bull market that everyone expected did not come as expected, but it is obvious that the volatility of Bitcoin has decreased, and the market's ability to bear the pressure is getting stronger. The mysterious power of Wall Street behind it has become everyone's "bottom-line" guarantee for the stability of Bitcoin. Because BTC is a pure asset and lacks a complete ecological support, the secondary market expectations of BTC seem to be out of touch with the primary market that everyone is building. In the short term, BTC's "gain" effect on the market cannot be extended to the primary price investment market, especially to the mainstream Ethereum Lego ecological market, the correlation is even weaker. However, the passage of the Ethereum ETF is very different? On the one hand, ETH's deflation will directly affect the activity of the primary market. Ethereum price growth, layer2 The advantage of low gas will be highlighted and will indirectly drive the development of the layer2 market. The reduction in Ethereum circulation will intensify the internal competition of Restaking and AVS interest-bearing tracks and drive value growth. Ethereum is in the hands of incremental funds and is used to invest in and support compliant top DeFi projects, etc.

If this example seems far-fetched, you just need to understand that the value of Ethereum today is little by little generated by this huge primary Build market behind it. On the contrary, ETH's own asset price and circulation audience will also bring a steady stream of users, funds, and talent resources to the industry ecosystem. This is the fundamental reason why Ethereum ETF will relatively promote the arrival of the "copycat season".

However, the ideal is beautiful, it is not easy to let mainstream funds flow into the ecosystem and drive the entrepreneurial ecosystem of web3. The passage of the "21st Century Financial Innovation and Technology Act" (FIT21) passed by the U.S. House of Representatives contains a lot of information. The bill clearly proposes to provide key consumer protection and promote innovation in the U.S. digital asset ecosystem. A brief interpretation: 1. The U.S. Commodity Futures Trading Commission (CFTC) has greater regulatory power, and digital virtual assets will be more flexibly and freely regulated under the "commodity" attribute, which is the basis for the long-term "stability" and less variables of the policy field; 2. "Compliance" will become the main theme of the development of the Crypto digital ecosystem, including the construction of institutional systems such as the process and standard specifications for issuing assets. This means that the virtual asset ecosystem will be divided into two extremes: Those that cater to compliance will gradually find solutions to key issues such as KYC and anti-money laundering, and will directly receive ETF gain Buffs. Those that do not cater to compliance will be subject to increased sanctions and crackdowns, and will gradually return to the niche market (for example: Tornado); Remember, in 2021, when a wave of institutions poured in, we defined the market as the first year of compliance, however The unexpected events of FTX and Luna delayed this long-cherished wish. The passage of ETFs still requires the face of "compliance" issues. 3. The U.S. government or chaebols will strongly "interfere" in key areas such as stablecoins, exchanges, digital asset custodians, and payment platforms. In the short term, the probability of directly making stablecoins such as direct legal stablecoins is low, but it is not ruled out that they will indirectly control the market through issuing licenses. 3) If the above speculation is true, it can be predicted that: In the short term, the secondary market of Crypto will be polarized, and some behind-the-scenes dealers will intensify their speculation before a series of regulatory bills are introduced. MeMe coins and some mainstream coins will have high volatility, and copycats will dance wildly; In the medium term, some head coins will be more popular, and the price of fake coins will be higher. DeFi, stablecoins, and exchanges will increase compliance efforts. Value targets with good compliance orientation will have good market performance, while those with poor compliance orientation will gradually lose value support. In the long run, the political color of Crypto will drive the crypto market to cater to the taste preferences of the web2 market little by little, which may disappoint some fundamentalists who adhere to a high degree of decentralization, but expecting policies to bring benefits and being pressed to the ground by policies are a double-edged sword. Web3 native is not an umbrella for fraud and money laundering in the name of decentralization. Under the big stick of compliance, the differentiation of population communities and the stratification of products are the general trend. Some very complex technologies and protocols of Crypto are difficult to influence by supervision, but the market will only stand in the most mainstream development route. (The choice actually lies with the market.

In short, it could be the last carnival of speculators, or a little bit of pressure from the sword of regulation, or the loss of speculative people after high volatility is constrained. Everyone has their own vision for the development of Crypto. Overall, the Crypto market under political guidance will definitely no longer maintain the original dream of pure "decentralization", but it can allow the Crypto market, which has been developing in a mixed order for many years, to eliminate the dross and make it possible for mainstream value coins to shine.