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Crypto ETFs: After Bitcoin and Ethereum, Solana and Ripple Could be Next

Last Updated May 27, 2024 12:32 PM
Giuseppe Ciccomascolo
Last Updated May 27, 2024 12:32 PM

Key Takeaways

  • The approval of Bitcoin and Ethereum exchange-traded funds marked a turning point for the crypto industry.
  • Speculation is high for ETFs featuring Ripple’s XRP or Ethereum competitors like Solana.
  • The US political landscape could influence the future of crypto ETFs.

Bitcoin and Ethereum have surged over the past year, largely driven by the introduction of Wall Street spot exchange-traded funds (ETFs). The BTC price rose to a new all-time high earlier this year, and ETH spiked recently before the ETF approval.

As the crypto ETF revolution kicks off with Bitcoin and Ethereum, market participants are speculating about which cryptocurrencies will be featured in future ETFs.

Crypto ETFs Revolution Started With Bitcoin

Bitcoin ETFs have arrived after a prolonged battle between the crypto industry and the US Securities and Exchange Commission (SEC). Many prominent investors, including Larry Fink , CEO of BlackRock – the world’s largest asset manager – view this as a pivotal step toward a new financial era.

ETFs are designed to provide investors with exposure to a young and risky asset class. However, the potential of blockchain technology extends beyond Bitcoin. Fink told Squawk Box that these new ETFs were just a precursor to the broader tokenization of other assets.

Before BlackRock filed its application for a Bitcoin ETF in June, sparking optimism about the fund’s potential, the tokenization of real-world assets such as gold had resurfaced as a hot topic among financial institutions. These institutions argued that tokenization would enable them to provide more information and data to clients about their investments.

Following the approval of the first ETFs based on Bitcoin, the cryptocurrency reached a new all-time high in March this year, surpassing the $70,000 threshold for the first time in its history.

Less than a week ago, an ETF based on Ethereum (ETH) was introduced. This further boosted confidence in the crypto market and raised expectations that more crypto ETFs may soon follow.

Solana And Ripple May Follow

As China quietly prepares for a potential boom in Bitcoin and Ethereum ETFs in Hong Kong, BlackRock’s head of crypto has outlined  the asset manager’s vision for the future of these cryptocurrencies.

Robert Mitchnick, head of crypto at BlackRock, said : “For our clients, the overwhelming interest has been in Bitcoin, with some interest in Ethereum, and not much in the vast array of over 10,000 other assets. It’s important to distinguish between these.”

He added: “I can’t overstate how powerfully attractive this is to every investor.

“We’re likely to see significant interest from international investors who want to participate. It’s a level of competition that’s hard to match.”

Speculation has surged following the surprise approval of the Ethereum ETF, with many wondering if Ripple’s XRP or one of Ethereum’s competitors, such as Solana or Avalanche, might be next for a Wall Street spot ETF. Mitchnick did not disclose which cryptocurrencies he personally holds besides Bitcoin and Ethereum.

Market Confident On SOL ETFs

The investment management company Bernstein has indicated that the approval of ETH spot ETFs could allow other cryptocurrencies ETFs. It will start with Solana, which is classified as commodities rather than securities.

The upcoming US presidential elections will be pivotal in shaping a more favorable approach to cryptocurrencies. According to Bernstein’s analysts, the Biden administration might soften its stance on the crypto sector in the coming months. A Trump election could significantly benefit the industry by introducing legislative support. And it may also bring to a new SEC chair, more amenable to crypto.

Analysts Gautam Chhugani and Mahika Sapra said : “We believe that, over the longer term, if Trump is elected, cryptocurrencies could see significant legislative support (with a new SEC chair) to usher in structural changes for crypto financial integration.

“The approval of the ETH spot ETF would set a crucial precedent, as it would mark the first crypto asset other than Bitcoin to be classified as a ‘commodity’. This could also raise hopes for other tokens to follow the same path.”

James Seyffart, an ETF analyst at Bloomberg, suggested  a possible timeline for the launch of a Solana-based ETF. Despite the community’s excitement following the approval of Ethereum spot ETFs, Seyffart noted that a Solana ETF could face significant delays. This is due to the regulatory environment in the US.

He said: “The Solana ETF will happen within a few years of getting a CFTC-regulated futures market. But Congress and market structure laws like FIT21 could speed up the process.

Seyffart also highlighted that the SEC’s classification of Solana as a security in its lawsuits against Coinbase and Kraken could further delay the launch of a Solana ETF.

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