Author: zhou, ChainCatcher

In the past month, a series of emerging cryptocurrency projects such as DOGE, XRP, Solana (SOL), Litecoin (LTC), Hedera (HBAR), and Chainlink (LINK) have had their spot ETFs approved for listing. Contrary to the market's general expectations, the prices of these assets did not soar following the ETF listings. The phenomenon of continuous capital inflow coupled with significant price corrections raises the question: Can the approval of ETFs still provide long-term effective support for cryptocurrency prices?

1. Price Pressure: Short-term Sentiment and Speculative Cleansing

From the end of October to November, the market welcomed a flurry of new cryptocurrency asset ETFs. However, according to SoSoValue data, the decoupling phenomenon of continuous capital inflow and price plummeting is prevalent among these assets:

• Solana (SOL): Since its listing at the end of October, the SOL ETF has recorded net inflows for four consecutive weeks, with total net assets reaching $918 million, of which Bitwise and Grayscale ETFs contributed $631 million and $148 million, respectively. However, the spot price of SOL has dropped from about $184 on October 31 to around $143 now, a decline of over 20%.
• XRP: The first XRP ETF launched on November 13, with a trading volume of $59.22 million on its first day, followed by continuous net inflows starting the next day. However, the spot price of XRP has fallen over 20% from $2.38 on November 13, currently hovering around $2.20.
• HBAR: After the HBAR ETF was listed on October 28, it achieved net inflows for the fifth consecutive week, with total net assets reaching $65.49 million, but the spot price of HBAR has dropped nearly 20%.
• DOGE: The DOGE ETF had no net inflow on its first day of listing on November 24, with a trading volume of $1.41 million. The total net assets of the two currently listed DOGE spot ETFs are $6.48 million, with no significant price fluctuations observed for DOGE.
• LTC: The LTC spot ETF was listed on November 5, with a cumulative total net inflow of $7.26 million, but there have been multiple days with zero net inflow over the past month. As a result, the price of LTC has dropped about 14% since the listing of the Canary LTC spot ETF on October 28.

It can be observed that, except for the Litecoin ETF, other cryptocurrencies' ETFs are experiencing continuous capital inflows, yet their prices are all experiencing declines or consolidations.

The reasons for this decoupling may stem from a combination of macro factors and speculative behavior.

First, it must be acknowledged that the overall environment of the cryptocurrency market during the ETF approval period was not characterized by a bullish sentiment. The performance of core assets confirms this: Bitcoin ETFs saw a net outflow of $3.48 billion in November, while Ethereum ETFs had a net outflow of $1.42 billion. The massive outflows from core assets created a strong overall negative sentiment and macro headwinds, overshadowing the incremental benefits brought by emerging ETFs. In this environment, the behavior of "buying the expectation, selling the fact" led to concentrated selling by speculators when the positive news materialized, creating short-term selling pressure.

Secondly, during the market downturn, the selling sentiment for altcoins with relatively poor liquidity was amplified. Compared to Bitcoin, cryptocurrencies like XRP and SOL have shallower market depths and limited capacity to absorb sell-offs. At the same time, the current speed of capital inflow is relatively slow, with institutions still in an observation phase, and their gradual allocation speed is insufficient to immediately offset the concentrated selling pressure from whales and speculators.

In summary, the short-term decoupling of capital inflow into ETFs and cryptocurrency prices is the result of speculative cleansing, macro headwinds, and the lagging speed of institutional capital deployment. However, this does not mean that the positive news has lost its effectiveness; rather, it reminds investors that the value of ETFs must be sought from a longer-term perspective and from the structure of institutional allocations.

2. Long-term Value: Institutional Allocation and Continuous Capital Inflow

Since the short-term performance of cryptocurrency prices is disturbed by external factors, the value of ETFs needs to be examined from two core dimensions: the sustainability of institutional capital inflows and the differentiated competitive advantages of the assets themselves.

This value is first reflected in the shift in attitude of traditional financial giants. Vanguard Group, one of the largest asset management companies in the world, which has long held a conservative stance on cryptocurrency assets, announced the opening of Bitcoin ETF trading. For years, its executives believed that cryptocurrencies lacked intrinsic value: they could not generate cash flow and were unsuitable for long-term retirement strategies. They viewed digital assets as speculative tools rather than core investment portfolios. The company rejected these products after the Bitcoin ETF is set to launch in January 2024, even restricting clients from purchasing competitors' funds.

Now, Vanguard allows investors to trade BlackRock's Bitcoin spot ETF, transforming its role from a critic to a distributor. This move undoubtedly signals to the market that ETFs, as compliant investment tools, have broken through the last major barrier in the traditional financial world.

It has been proven that despite the price plummeting, institutions' willingness to allocate assets remains firm. For example, the SOL ETF and HBAR ETF have seen net inflows for five consecutive weeks; the total net asset value of the Canary XRP ETF has reached $355 million, and the net assets of Bitwise and Grayscale's ETFs are both around $200 million. This continuous and substantial accumulation of capital is a key indicator for measuring the long-term benefits of ETFs. Analysts estimate that even if the scale is dwarfed compared to Bitcoin, altcoin ETFs could still bring in $10 billion to $20 billion in capital inflows by mid-2026.

In institutional allocation strategies, the differentiated competitive advantages of assets are also a key factor. For instance, Solana's staking ETF offers yields of up to 7%, and XRP's payment-type fund products may attract specific interest from investors seeking diversified investments or passive income. Zach Pandl, head of research at Grayscale, has stated that the Solana ETF could absorb at least 5% of the total supply of Solana tokens within the next one to two years.

However, this optimistic sentiment is being strongly challenged by market giants. BlackRock, the world's largest asset management giant, holds a highly cautious and negative attitude towards altcoin ETFs. Robert Mitchnick, head of digital assets at BlackRock, stated that most altcoins are worthless and emphasized the risks of investing in a diverse range of underdeveloped digital assets, thus focusing on mature cryptocurrencies like Bitcoin and Ethereum. Bloomberg ETF analyst Eric Balchunas also supports this view, suggesting that this stance explains why BlackRock is reluctant to diversify its portfolio.

This cautious stance brings potential risks. K33 Research indicates that without BlackRock's participation, the total capital inflow into altcoin ETFs could decrease by 50% to 70%. Meanwhile, the CEO of CryptoQuant warns that the liquidity of altcoins is rapidly declining, and only those projects that can open new liquidity channels (especially through ETFs) will survive in the market.

Additionally, the experience of the LTC spot ETF serves as the most obvious cautionary tale, with multiple consecutive working days of zero net inflow since its listing. CoinShares, one of the largest digital asset management companies in Europe, has also officially withdrawn its applications for XRP, Solana Staking, and Litecoin ETFs submitted to the SEC, demonstrating that even large asset management companies remain vigilant about single-asset ETFs in a competitive and profit-limited environment.

CoinShares CEO Jean-Marie Mognetti stated that given the dominance of traditional financial giants in the single-asset cryptocurrency ETF market, the company will reallocate resources to more innovative and higher-profit products over the next 12 to 18 months.

Conclusion

The divergence among institutions precisely confirms that the era of cryptocurrency asset ETFs is entering a phase of layered allocation. On one side, Vanguard's opening of Bitcoin ETF trading symbolizes the mainstream financial world's ultimate acceptance of the cryptocurrency market; on the other side, CoinShares' withdrawal of applications and BlackRock's cautious attitude towards altcoins reflect institutions' vigilance regarding the quality of underlying assets and competitive dynamics.

Overall, the approval of ETFs is undoubtedly a significant positive in essence and in the long term, while the short-term decline in cryptocurrency prices does not mean that the positive news has lost its effectiveness; rather, it indicates that the realization of benefits has been distorted by short-term market forces.

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