Altcoin ETF narrative begins? XRP rises strongly, and demand for crypto ETPs surges in the European and American markets

Author: Weilin, PANews

The long-dormant altcoin market has finally recovered.

On December 2, the price of the old altcoin XRP hit a seven-year high, and its market value surpassed Solana, becoming a new focus of widespread attention in the crypto market. At the same time, as the regulatory environment in the United States is expected to become clearer, the demand for crypto ETPs (exchange-traded products) has surged, and more institutions are entering the market to apply for altcoin ETFs, such as Bitwise, Canary, 21Shares, and WisdomTree. In Europe, although the scale of asset management is far less than that of the United States, due to the regulatory framework, its position as an investment tool for crypto ETPs has been consolidated, and more institutions have participated in the layout, such as Bitwise, 21Shares, and crypto research company Kaiko.

Altcoin market recovers: XRP surpasses Solana in market cap

On December 2, XRP surpassed Solana (SOL) in market value and jumped to fourth place in the cryptocurrency market value rankings. According to Coingecko data, XRP rose 17.6% in 24 hours, with a price of $2.28 and a market value of approximately $130.1 billion. This rise marks XRP's highest point in seven years.

The progress of Ripple's lawsuit against the SEC is the direct reason for the rise of XRP. On December 1, former CFTC Chairman Chris Giancarlo discussed the high-profile US SEC lawsuit against Ripple over XRP in an interview this week. Giancarlo believes that the SEC should reconsider its approach, especially in light of recent legal results and the potentially changing regulatory environment. When asked whether the SEC would abandon the Ripple lawsuit, Giancarlo said: I think they should... I bet they will.

Additionally, the market value of Grayscale’s portfolio has risen 85% over the past month, driven by altcoins such as XLM and XRP. The surge in XLM prices, in particular, is partly attributed to Grayscale’s recent 10-K filing for its Grayscale Stellar Lumens Trust, in which 34,875,230 XLM tokens (worth approximately $3,923) were added to the trust, driving a net increase in the trust’s overall assets.

Data from the US Ethereum ETF also reflects the arrival of the alt season. On November 29, the US spot Ethereum ETF set a new record for single-day inflows. According to Farside data, the nine spot Ethereum ETFs attracted a total of $332.9 million in inflows, surpassing the previous record of $295.5 million set on November 11, an increase of $37.4 million. Several cryptocurrency commentators pointed out that on November 29, the inflows of Ethereum ETFs exceeded the inflows of the spot Bitcoin (BTC) ETF on the same day, which was $320 million.

Felix Hartmann, founder of Hartmann Capital, believes this is a signal that Wall Street has "officially joined" the altcoin rotation.

Institutional entry, more altcoin ETFs are being applied for

Since the Bitcoin spot ETF craze started at the beginning of this year, the participation of Wall Street giants such as BlackRock and Fidelity has marked the further penetration of Bitcoin into the mainstream market and the integration of TradFi and Crypto. At the same time, the market has widely discussed the next token that may attract investment from Wall Street giants. PANews previously wrote an article about Solana, which was once seen as one of the most likely choices due to its market value and potential.

Meanwhile, there are currently three ETF applications to hold XRP, the fourth largest crypto asset by market capitalization. Bitwise, Canary, and 21Shares have all submitted spot XRP ETFs. In addition, global investment management company WisdomTree, known for its wide range of ETFs, has submitted an application to Delaware to establish an XRP ETF, marking WisdomTree's growing interest in expanding its presence in the digital currency space. WisdomTree currently manages approximately $113 billion in assets worldwide.

Prior to this, the asset management company launched Wisdomtree Physical XRP (XRPW) on prominent European exchanges including Deutsche Börse Xetra, SIX Swiss Exchange, and Euronext in Paris and Amsterdam. The company positioned XRPW as the most cost-effective European XRP investment product.

Crypto ETP demand surges: driven by both the US and European markets

ETP is a general term that includes many types, such as ETFs (Exchange Traded Funds), ETNs (Exchange Traded Notes), ETCs (Exchange Traded Commodities), etc. Although ETP is a general term for such products, the term ETP is sometimes also used to refer to debt securities exchange traded products.

James Butterfill, head of research at CoinShares, noted on November 22 that the total assets under management of digital asset ETPs exceeded $150 billion for the first time. According to CoinShares data, digital asset investment products listed in Germany, Sweden, and Switzerland manage a total of about $13.64 billion in assets. In comparison, the assets under management of related products in the United States are about $88.78 billion.

In the European market, crypto ETPs have a solid dominance and institutional participation is increasing. As of November 28, there were 221 cryptocurrency ETPs in the European market, with assets under management (AUM) of $18.132 billion and net inflows of $549 million in the past six months. ETPs provide retail and institutional investors with a convenient, regulated and low-cost way to invest in cryptocurrencies. Compared with directly purchasing crypto assets, ETPs can help investors avoid some potential volatility risks.

Due to the restrictions of Europe's UCITS (Undertakings for Collective Investment in Transferable Securities) regulations, there is currently a lack of true cryptocurrency ETFs in Europe. UCITS rules have high diversification requirements for funds, which limits the issuance of single-asset ETFs. For example, UCITS diversification requirements include that no single asset may exceed 10% of the fund, and the underlying assets must be eligible financial instruments. In June 2023, the European Commission tasked the European Securities and Markets Authority (ESMA) to investigate whether UCITS rules need to be updated and focus on cryptocurrency assets. However, the purpose of this move seems to be to determine whether more rules and investor protection are needed, rather than to expand the types of eligible products.

Even so, the scale and development potential of the European crypto ETP market cannot be ignored. Companies such as CoinShares, Bitwise, and 21Shares have already occupied an important position in this field, and with the gradual relaxation of supervision in the future, the crypto ETF development potential in the European market is huge.

Institutional participation accelerates ETP market reform

As early as October 20, Jan van Eck, CEO of asset management company VanEck, said that the company currently has 12 token-based products trading in the European market. Currently, VanEck's cryptocurrency ETP scale in Europe has reached 2 billion euros, but a large part of it comes from individual investors, and institutional investors have low participation. Wealth management companies have not made any allocations, and they have not even started to act. In addition, Jan van Eck also said that few private banks have actually approved investments in Bitcoin or Ethereum, and there have been no major initiatives in other crypto assets.

However, as the results of the US election came out, the situation changed rapidly. Institutional issuers of crypto ETPs made many new moves in November. On November 12, cryptocurrency research company Kaiko announced the acquisition of European cryptocurrency index provider Vinter. The acquisition aims to expand Kaiko's cryptocurrency data market and enhance services for asset managers and institutional clients. Kaiko and Vinter will jointly provide regulated products such as derivatives, ETFs and ETPs.

On November 27, Ripple announced that it would invest in the renamed Bitwise Physical XRP ETP fund (formerly known as the "European XRP ETP"). Ripple CEO Brad Garlinghouse said that the decision to invest in the Bitwise fund (whose trading code is GXRP) is highly consistent with the growing interest in ETPs related to crypto assets.

“As the U.S. cryptocurrency regulatory environment finally becomes clearer, this trend is expected to accelerate, further driving demand for crypto ETPs such as the Bitwise Physical XRP ETP,” he said.

On November 28, Swiss wealth management company 21Shares added four ETPs to its European products, namely PYTH, ONDO, RNDR and NEAR, covering price oracles, asset tokenization, decentralized computing and artificial intelligence. All four ETPs will be traded on exchanges in cities such as Amsterdam and Paris.

In general, altcoins such as XRP have received unprecedented attention recently, and the narrative of altcoin ETFs may become the next round of growth momentum, injecting new vitality into crypto assets. As the regulatory environment becomes clearer, crypto ETPs, as a regulated and convenient investment tool, are expected to continue to attract more investors and promote further market maturity.