The last 12 months have been a game-changer for digital assets. In January, more than a decade after Gemini co-founders Cameron and Tyler Winklevoss filed their initial application, the first spot Bitcoin was approved for trading in the United States by the Securities and Exchange Commission (SEC).
Bull Market Euphoria: The Unexpected But Desperately Needed Ethereum ETF
This article was published more than a year ago. Some information may no longer be current.
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The following is an opinion editorial written by Solo Ceesay Co-Founder and CEO of Calaxy, a next-generation social platform redefining the creator-fan relationship. Before co-founding Calaxy with his business partner, Dallas Mavericks star Spencer Dinwiddie, Solo held the position of Securitization Investment Banker at Citi after graduating from the Wharton School of Business.
A Crucial Inflection Point in the History of Financial Markets
Since then, Bitcoin ETFs have attracted more than $17 billion of net inflows while cumulative holdings across ETFs total more than $62 billion. Michael Saylor, CEO of MicroStrategy, calls it the greatest development Wall Street has seen in 30 years. And even after all of that, we still haven’t truly experienced a ‘supply shock’ and the greater impacts of the most recent halving event are still yet to be witnessed.
Amidst all this, former President and 2024 Republican nominee Donald Trump now leads the bill of what seems to be an endless list of celebrities actively educating themselves and their audiences on the powers behind distributed ledger technologies (DLT). Trump publicly acknowledged the importance of any person’s right to self-custody and argued that all remaining Bitcoin should be mined domestically – whether he actually understands what this means remains to be seen.
Rumors about Trump proliferate: In one instance, Trump is considering adding Bitcoin as a strategic U.S. Treasury asset and could potentially raise the topic this week at Bitcoin Nashville, the world’s largest Bitcoin conference. Given Bitcoin and crypto have become a bipartisan issue, it’s reasonable to expect Kamala Harris, the most likely Democratic nominee, will also attempt to narrow the divide and appeal to the growing number of Americans who are passionate about decentralized currencies.
To top it all off, Gary Gensler and the SEC shocked the entirety of the industry in May by unexpectedly announcing they would approve spot Ethereum ETFs. It’s public knowledge that Gensler has declared Ethereum a commodity; however, there have been extensive (and mildly productive) court proceedings that led industry leaders to believe that an Ethereum ETF would be a big ask. But we have arrived!
We are approaching what appears to be a crucial inflection point in the history of financial markets. The Bitcoin ETF served as a gateway for the world’s largest asset managers to prove Bitcoin’s viability as a reputable store of value. Ethereum ETFs, however, provide the same asset managers the opportunity to directly invest in the rebirth of the internet as we know it.
What Happens Now?
The launch of the Bitcoin ETF was eye-opening, with regards to just how large of an undertaking self-custody is. Setting your own financial controls and ensuring the safekeeping of funds sounds good in theory, but the friction required to overcome the operational considerations of this technology has proven to be far greater than its immediate benefits, especially given how explosive inflows have been.
It is reasonable to assume that freshly injected capital will greatly impact spot price but interestingly, some argue there’s also less of an opportunity associated with ETH ETFs.
At present, ETH is significantly less costly to own than BTC, so exposure to risk could potentially be seen as lower. With that said, ETH ETFs deny spot holders the opportunity to hold a regular ETH token and reap the rewards of DeFi (e.g. passive income through staking, or leverage for incremental upside). Virtually all major institutions manage their own treasuries and have to preserve the value of said treasuries. This underscores the appeal of assets like BTC, though it’s unlikely the same institutions have the desire to invest in what could be described as the “internal plumbing” of the next generation of the internet.
That said, Ethereum as an ecosystem has some unique properties relative to Bitcoin. Not only do ecosystem tokens stand to benefit from additional liquidity pushing the overall market higher but so do the various Layer 2 ecosystems that live on top of Ethereum. More specifically, ecosystem tokens like Pepe the Frog and the entirety of the Base and Blast ecosystems alike are inevitable beneficiaries. Simply put, as prices move upwards, traders will rotate Ethereum profits into ecosystem plays with more upside.
A lesser-discussed byproduct of the Ethereum ETF is how its impact on spot prices will ultimately lead to higher gas fees. This typically pushes flows to other blockchain ecosystems with more progressive fee structures; however, the outsized liquidity of the Ethereum ecosystem is hard to compete with.
Conclusion
As history has taught us, disruptive, transformative technologies are often met with resistance. Not simply because those technologies are often misunderstood but rather because they pose a deeper threat to the status quo. Amidst what could arguably be the most polarizing political dynamic in the history of our country, we’ve been presented with technology that’s coded to the supposed values of fairness and equity that we preach daily.
Outside of all the stated benefits and use cases for blockchain technologies, the most impactful is the opportunity to empower every American and escape the perils of storing wealth in fiat-denominated assets, especially given how inescapable inflation is.
By decentralizing money, and shifting the balance of power that controls it, we give ourselves a real fighting chance at repairing the seemingly inescapable debt crisis America, and the world, are experiencing. Today, Bitcoin and its ETF are making great progress on this. Tomorrow, we start to work on everything else. In the meantime, thankfully, it appears we’re well underway with this week’s ETH ETF approval.
What do you think about Solo Ceesay’s opinion article? Share your thoughts and opinions about this subject in the comments section below.
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