Exchange-traded funds for Bitcoin and Ethereum have now been active for over a year. New rulings from the SEC have paved the way for other crypto ETF products to be brought to the market more easily and quickly.
On Wednesday, the 17th of September, the US Securities and Exchange Commission approved generic listing standards for commodity-based exchange-traded funds. This means crypto-based ETF products can now be created and approved with much faster turnaround times. It is believed that, as well as speed, this will also cut the costs associated with administration. But is it set to lead to a flurry of crypto ETF products, and is this good for the price of crypto?
SEC Lightens Rules on Crypto ETF Products
On approval, the first multi-crypto ETF product was launched in the form of the Grayscale Digital Large Cap Fund. This holds both Bitcoin and Ethereum, alongside Solana, Cardano, and XRP. This proved a huge boost to the altcoin sector, particularly XRP. When the news broke, the XRP price USD rose to $3.08. It has since retraced to a 2.85 level. Other altcoins also benefit from the news. Exchange Binance highlighted that in the week after, altcoins broadly outperformed, signalling renewed risk appetite. Sector-level returns were strong, with Gaming, Layer 2, and Memecoins each rising over 7%, while nearly every altcoin sector outpaced BTC’s 1.5% weekly gain.
Previously, issuers of spot crypto ETF products had to undergo a lengthy process. This involved a review by the SEC, and they were open to public comment. This is the reason most current ETF products focus solely on BTC and ETH. Under Section 19(b) of the Securities and Exchange Act of 1934, individual approval has been eliminated.
A host of ETF products are now waiting for final approval. These include ones for SOL, XRP, Litecoin, and Dogecoin. All had deadlines of October onwards for the SEC to make decisions on. Waiting in the wings are a handful of others, including Avalanche, Chainlink, Polkadot, and BNB. The latter of these is one product having a stellar month with Binance noting that BNB surged over 10% this week, becoming the second-best performing large-cap YTD, overtaking ETH. Growth in BNB Chain activity, token burns, and exchange-driven demand also strengthened its fundamentals, while treasury inflows highlighted growing institutional interest beyond BTC.
What Will This Do to the Price of Crypto?
James Seyffart is a Bloomberg ETF analyst. His comment on the rulings was that “This is the crypto ETP framework we’ve been waiting for,” and he could well be right. A wave of crypto investment products will be launched in the coming weeks, and his sentiment is backed up by key figures. Nate Geraci is the president of Novadius Wealth Management. He believes that actual odds may be much higher than market predictions. On X, he wrote that there is an underestimation of the demand for XRP and SOL ETF products, just like people underestimated Bitcoin and Ethereum-based ones.
Not everyone shares this, and even within the SEC itself, warnings have been issued. The Commissioner Caroline Crenshaw has said that this market flood could end in disaster with untested products. Her statement read “The Commission is passing the buck on reviewing these proposals and making the required investor protection findings, in favor of fast tracking these new and arguably unproven products to market.”
Sights Set on XRP
XRP is one coin that many are holding out big hopes for. As the third biggest cryptocurrency by market cap after Bitcoin and Ethereum, it makes sense that it would have ETF approval after the others gained it last year. However, a prolonged battle with the SEC held this up until its recent resolution.
An exchange-traded fund for XRP would work just like any other ETF product. This is a basket of commodities or assets held by a company. People who buy into them don’t own the product directly; instead, they own a stake in the firm that does. This hedges against some of the inherent risks involved in cryptocurrency. Crucially, it will attract more traditional and risk-averse investors to XRP. This will mark the end of a great year for the coin. It currently has a market capitalization of $178 billion, and its value has soared this year.
However, XRP has suffered in the last week, and its use as a cross-border payment method could determine its future value more than ETF products. Many believe that it may be getting edged out by stablecoins, of which Ripple is producing their own. For XRP to really flourish, it needs more institutional adoption, but this may not be in the way ETH and BTC have done. Instead, XRPs' future may hinge on real-world uses, and if these can be implemented, then their value will soar along with the rise of ETF products.
