The ETF concept is rekindled. Can the market move towards a bull market again?

ETF concept rekindled, can the market move towards a bull market again?

——Summary of views from space guests on March 20

Introduction  

The cryptocurrency market presents a complex and controversial picture under the interweaving of multiple factors such as the Fed's policy swings, the approval of Bitcoin ETFs, and the obstruction of the approval of altcoin ETFs. In a recent live broadcast with the theme of "ETF concept rekindled, can the market go bullish again?", three industry veterans - Cofounder of Bitlayer Charlie @CharlieHusats, senior institutional investor, financial self-media person Investment TALK @TJ_Research01, Beosin researcher Eaton @Beosin_com - discussed from multiple dimensions such as policy, technology, and market. Based on the transcript of the conversation, this article systematically sorts out the views of the guests and analyzes the core contradictions and future trends of the current crypto market ETF. 1. Federal Reserve policy: short-term emotional comfort and long-term uncertainty 1.1 Signals released by the interest rate meeting At the Federal Reserve's interest rate meeting that ended in the early morning, the Federal Reserve announced that it would keep interest rates unchanged and plan to slow down the process of balance sheet reduction from April. The dot plot shows that a 50 basis point rate cut is still expected this year. Investment TALK pointed out that this resolution is more of a short-term emotional appeasement than a substantive policy shift. He believes that the market's interpretation of "no bad news" has driven the rebound of risky assets, but the long-term impact remains to be observed. Key signal analysis: Slowing balance sheet reduction: The Fed continues to reduce the scale of balance sheet contraction, which is seen as implicit support for liquidity. Inflation expectation management: Powell emphasized that the impact of tariffs on inflation is "temporary" and tried to ease market concerns about stagflation. Policy path dependence: The Fed still uses the tariff cycle in 2018 and 2019 as a reference and lacks a clear response framework for the current complex situation.  

1.2 Short-term and long-term impact  

Investment TALK believes that the Fed's dovish stance has stabilized market sentiment in the short term, but long-term uncertainty has not been eliminated. "The timing and intensity of the tariff policy are still the sword of Damocles hanging over the market." Once the tariff policy is clear, the market may usher in a real directional breakthrough.  

Teacher Charlie added that the correlation between the Fed's policy and the cryptocurrency market is increasing. The linkage between Bitcoin price trends and US technology stocks (such as Nvidia) has significantly increased. The characteristics of reduced trading activity on weekends and increased volatility on weekdays reflect the deepening participation of institutional investors in cryptocurrencies.  

2. Bitcoin ETF: A “Compliance Channel” for Institutional Entry  

2.1 Market Impact of ETF  

Since the approval of the Bitcoin spot ETF in January 2024, its asset management scale (AUM) has exceeded US$100 billion, becoming the core force driving this round of bull market.

Charlie pointed out that the approval of the ETF marks the official entry of cryptocurrency into the mainstream financial system, but its capital inflow mainly comes from high-net-worth individuals and arbitrage institutions, rather than traditional pension funds or insurance companies.  

The three major functions of ETFs:  

1. Reduce volatility: The entry of institutional funds makes the price fluctuation of Bitcoin close to that of traditional assets, and the day trading model gradually becomes "U.S.-like".  

2. Improve liquidity: The linkage between CME futures contracts and spot prices is enhanced, and the arbitrage mechanism is becoming more mature.  

3. Transfer of pricing power: ETF issuers represented by BlackRock and Franklin are reshaping the pricing logic of Bitcoin.  

2.2 Decoupling of Bitcoin and Altcoins  

Charlie emphasized that the current market is characterized by "Bitcoin dominance", which is completely different from the ICO boom in 2017 or the DeFi Summer in 2021. "Bitcoin and altcoins are already two independent markets." Institutional investors have a unified understanding of Bitcoin, while altcoins are difficult to receive the same attention due to problems such as insufficient compliance and dispersed liquidity.  

Investment TALK took MicroStrategy (MSTR) as an example and pointed out that the premium fluctuations between its stock price and the Bitcoin ETF reflect the differences in preferences between retail investors and institutions for leveraged Bitcoin investments. "MSTR has become a barometer of market sentiment, but its high premium risk cannot be ignored."  

3. Altcoin ETFs  

3.1 The root cause of SEC approval delay  

Eaton analyzed that the SEC's repeated attitude towards altcoin ETFs stems from political cycles and changes in regulators. Currently, SEC Chairman Gary Gensler is serving as an acting chairman, and Trump's crypto-friendly candidate Paul Hour is about to take over. This transition period has led to increased policy uncertainty.  

The core reasons for the delay in approval:  

Compliance threshold: SEC requires altcoins to prove their degree of decentralization, market depth and anti-manipulation.  

Lobbying power difference: Bitcoin ETF was approved thanks to strong lobbying by Wall Street institutions, while altcoins lack the same resources.  

Insufficient market demand: Ethereum ETF's price performance was weak after its approval, which weakened the market's expectations for altcoin ETFs.  

3.2 The future of altcoin ETFs  

Although Mr. Charlie believes that "it is only a matter of time before the top ten altcoin ETFs are approved", Mr. Eaton is cautious. He pointed out that the inflow of funds into Ethereum ETF is much lower than that of Bitcoin, and the price continues to fall. "The market needs to see the substantial pull of ETF on prices, otherwise the enthusiasm for approval will further cool down." Investment TALK Jun added that if altcoin ETF wants to break through, it must meet two major conditions: 1. Innovation of underlying assets: For example, tokenizing real income such as real estate rent and mineral income. 2. Regulatory sandbox experiment: accumulate credit through compliance pilots in Singapore, Dubai and other places.  

IV. Institutional entry: Reconstructing market logic  

4.1 Changes in capital structure  

The entry of institutions such as BlackRock and MicroStrategy is changing the capital structure of the cryptocurrency market:  

From retail investor-driven to institutional-led: Institutions account for more than 60% of the average daily trading volume of Bitcoin ETFs.  

From speculation to allocation: Bitcoin is gradually included in the asset allocation framework of "digital gold", and the demand for hedging against inflation and geopolitical risks is increasing.  

Teacher Charlie took the miners as an example and pointed out that their voice has been weakened by the entry of institutions: "Miners used to be able to influence prices through joint control, but now they have no advantage in front of Wall Street capital."  

4.2 Evolution of pricing logic  

Investment TALK believes that institutional investors are more concerned about the long-term volatility of Bitcoin rather than its short-term price. "The decline in volatility is a prerequisite for Bitcoin to be included in the investment portfolio of pension funds." Currently, the 30-day volatility of Bitcoin has dropped from 80% in 2021 to 35%, close to the level of gold.  

Teacher Eaton emphasized that the compliance process (such as anti-money laundering review and tax reporting) is improving market transparency, but it may also suppress the enthusiasm of retail investors to participate.  

V. Market Outlook: Key Variables in the Second Half of 2024  

5.1 Fed Rate Cuts and Cryptocurrencies  

The three guests agreed that whether the Fed will start cutting interest rates in 2024 will be the biggest variable affecting the market. If the rate cut exceeds expectations, Bitcoin may exceed $100,000; if inflation rebounds and leads to a restart of rate hikes, the market may face a deep correction.  

5.2 Regulation and Technological Innovation  

Regulatory breakthroughs: The advancement of the US encryption bill and the expansion of Hong Kong's virtual asset licenses may become catalysts for a new round of market conditions.  

Technology iteration: The maturity of Bitcoin Layer2 (such as Stacks, RSK) and Ethereum ZKRollup is expected to improve the practicality of on-chain assets.  

 5.3 The survival battle of altcoins  

Teacher Charlie predicted that 2024 will be the "reshuffle year" for altcoins. "90% of altcoins will return to zero, and the remaining 10% need to prove their real use cases." He specifically mentioned that innovative projects combining RWA (real world assets) and DeFi may become dark horses.  

Conclusion  

The cryptocurrency market in 2025 presents unprecedented complexity in the collision between traditional finance and decentralized concepts. Bitcoin has entered the mainstream through ETFs, while altcoins are struggling to survive in compliance and innovation. Every swing in the Fed's policy is reshaping the risks and opportunities of the market. For investors, while chasing returns, they must be more vigilant against the undercurrents in market differentiation and regulatory changes. Live playback link: https://x.com/i/spaces/1zqKVjnVNzZKB

Note: This article is based on the live discussion of the guests and does not constitute an investment advice. The market is risky and decisions must be made with caution.