The Impact of the Approval of Ethereum Spot ETF on the Crypto Ecosystem (1)

The approval of the Ethereum spot ETF will have a profound impact on the crypto ecosystem.

I believe this will manifest in two main aspects:

First, traditional capital from Wall Street will eventually cover the entire entry and exit of crypto assets to fiat currency (USD) and (through financial tools like spot ETFs) control the pricing power of all mainstream crypto assets.

Second, traditional giants from Wall Street will inevitably lay out comprehensive plans in the infrastructure and application fields of the crypto ecosystem.

Let's first look at the first point.

Wall Street's financial giants have successfully harvested Bitcoin and Ethereum spot ETFs.

But I believe their goals are far beyond just these two tokens; the bloodthirsty nature of finance will surely drive them to extend their reach to all possible targets, covering the entire crypto ecosystem with their influence.

Therefore, after Bitcoin and Ethereum, they will undoubtedly tirelessly seek one new target after another, launching one new crypto asset spot ETF after another.

In the current crypto ecosystem, from a technical perspective, we can roughly categorize (homogeneous) tokens into two types: one is native tokens based on blockchain (such as Bitcoin and Ethereum), and the other is derived tokens based on blockchain protocols (such as ERC-20 tokens and BRC-20 tokens).

According to the latest FIT21 Act, native tokens based on blockchain are relatively easier to be viewed as "non-securities" because they can be more easily decentralized, serving more like services or consumables, and can operationally avoid being classified as securities.

Among native tokens based on blockchain, there are two mainstream types based on consensus mechanisms: POW-based tokens and POS-based tokens. In these two categories, POW is the minority, while POS is the majority.

According to past statements from the current SEC chairman, POW native tokens are relatively easier to avoid the suspicion of being "securities," and Bitcoin, being a typical POW and the king of the entire crypto ecosystem, was the first to have its spot ETF approved.

For POS tokens, due to the current chairman's previous negative remarks, we initially thought that their staking mechanism would be an obstacle for token ETFs to be approved. However, the approval of the Ethereum spot ETF indicates that, in terms of approval standards, POS and staking mechanisms are not barriers.

This means that both POW and POS native tokens in the entire ecosystem have become potential targets.

In addition to POW and POS tokens, there is a larger group of tokens in the entire crypto ecosystem, which are derived tokens based on blockchain protocols, especially tokens based on the Ethereum ERC-20 protocol.

Currently, it seems that no institution has submitted relevant spot ETF application materials for tokens in this field. This indicates that, at least for now, these tokens are not a focus for institutions.

Interestingly, most of the projects issuing ERC-20 tokens have not linked the tokens to the expected returns of the projects, merely granting the tokens a so-called "governance function." This makes these "governance tokens" seem unrelated to "commercialization" and obtaining "expected profits."

However, these ERC-20 tokens are relatively easier to touch upon the determination of "decentralization."

In contrast, a large number of inscription tokens led by BRC-20 that have risen in this round of the Bitcoin ecosystem appear to lack the characteristics of "commercialization" and "expected profits," and seem more "decentralized." To some extent, as long as they have sufficient liquidity and accumulate high consensus, it is entirely possible that one day they will also be issued as ETFs by the giants.

Based on the above clues and speculations, I believe the general path for Wall Street giants will be as follows:

Continue to search for new targets among POW and POS native tokens. However, they will not blindly select without purpose but may choose tokens with the following characteristics: large market capitalization, strong consensus, good liquidity, and dispersed chips controlled by others.

In fact, there are very limited good targets among these native tokens at present, so once the good targets among these native tokens are selected, I believe they will definitely aim at protocol tokens such as ERC-20 and BRC-20.

In summary, several years from now, when we reassess the entire crypto ecosystem, we will surely find that almost all good targets in the ecosystem have been issued as spot ETFs by Wall Street giants. By then, crypto assets will rightfully emerge as a new financial asset in the world.

Based on this speculative route, let's wait for these giants to submit new spot ETF application materials to the SEC next time and see which tokens they are targeting.