Pantera Capital analyzes the repercussions of the ETFs that will imminently launch into the market.

In Short

• Combined with regulatory developments, Ethereum ETFs will favor the entire industry.
• For Pantera Capital, the regulatory framework “offers a promising start.”

In the world’s economic powerhouse, the United States, a new landscape for the cryptocurrency market is emerging with promising effects. Former president and Republican presidential candidate Donald Trump has thrown his support behind the industry. “A very astute move, as many of the young people who own cryptocurrencies are so passionate about their importance to the world that they are single-issue voters,” expressed investment firm Pantera Capital.

For the investment company, this stance by Trump would appeal to young people who had not previously considered voting for him. It argues that this led the Democratic-led administration to change its position, leading to advances in the industry. Adding to the authorization of bitcoin (BTC) exchange-traded funds (ETFs) in the country this year, those for ether (ETH), Ethereum’s cryptocurrency, was approved last month despite its low expectations charted below. In addition, it won bipartisan approval for the FIT21 bill, which establishes a regulatory framework for digital assets. “I don’t recall seeing such entrenched policy change so quickly,” Pantera Capital argued.

Ethereum ETF approval probabilities before authorization, according to expectations. Source: Pantera Capital.

“The long tail of digital assets can benefit greatly from this,” the firm emphasized. The way it looks at it, the authorization of Ethereum ETFs, with the approval of FIT21 and the changing sentiment of the political and regulatory landscape for cryptocurrencies, will have five impacts on the market.

Regulation enables more crypto users and technological advancements

The first impact is market growth and diversification. “While the introduction of a bitcoin ETF was significant, especially in terms of the use case for cryptocurrencies as a store of value, the existence of an Ethereum ETF may have strong implications for the broader spectrum of tokens,” Pantera Capital noted. Unlike Bitcoin, created to develop a decentralized currency with limited issuance, Ethereum is a network that allows developers to create multiple tokens and applications. Therefore, according to the investment firm, the latter’s attention may spread among investors as they explore it as a technology platform.

That is why there are expectations that the launch of these instruments will propitiate a bullish momentum for altcoin prices. The date of this event is not defined, but according to SEC Chairman Gary Gensler, it will be sometime between this month and September. The second impact has to do with the technological advances it can spur. “If FIT21 passes in the Senate and they establish clear frameworks for token projects to adhere to, this can accelerate the pace of innovation,” he warns.

As a third effect, Pantera Capital points out that bitcoin ETFs, along with the upcoming Ethereum ETFs, are available alongside the other securities out there, strengthening the case for seeing crypto assets as another asset class in traditional financial markets. The fourth is that it opens the door to allowing ETFs of more cryptocurrencies. To find out which one will be next, the investment firm advises monitoring BlackRock’s next move. This company, the world’s largest asset manager, holds the record for approved solicited funds, a streak it maintained when it got involved in the crypto asset market.

Tokens as a new form of Capital

Finally, the fifth impact is that tokens will gain use as capital:

“Creating a regulatory framework whereby these tokens can begin to reflect the fundamental value creation of the underlying protocol, with novel ways to share those cash flows with token holders contributing to the protocol, is a critical step in achieving that future,”

Pantera Capital

As such, the approval of Ethereum ETFs and FIT21 represents a significant change to the regulatory and policy landscape in the economic powerhouse. For Pantera Capital, it “offers a promising start” to this transformation.

“They could bring a new era of innovation in cryptocurrencies, attract a broader base of investors and users, and ensure that the U.S. industry does not lag behind the rest of the world,” he concludes.