The US Securities and Exchange Commission (SEC) has approved spot Ethereum ETFs. These projects are set to start trading in late June or early July, and while the approval impacted Ether’s price, the broader cryptocurrency market is also set to react.
Ethereum has seen substantial gains since Ethereum ETFs were approved. ETH was trading at $3,759 as of 01:05 EST.
Unlike Bitcoin ETFs, which brought legitimacy to Bitcoin, Ethereum ETFs are set to transform the altcoins market. Therefore, once spot Ether ETFs start trading, it could impact several areas of the altcoin market.
Layer Twos and Zk-Rollups
Among the projects that will react after the Ether ETF approval is layer-twos such as Arbitrum and Optimism. These two projects see significant gains in their native tokens whenever there is a considerable movement in the price of ETH.
The other technological innovation on Ethereum that is set to benefit from ETF approvals is zero-knowledge proofs behind most layer-two protocols.
The approval of the spot Ethereum ETF could see many switch from later ones to Ethereum rollups, which will further the growth of the Ethereum ecosystem.
EVM-Compatible Blockchain Projects
EVM-compatible blockchains such as Polygon and Avalanche are also set to post significant gains following ETH ETF approvals. This is because projects created on these projects can interact with other blockchains.
With the approval of spot Ether ETFs, one issue that will be scrutinized is EVM blockchains. The approval brings Ethereum into a regulated space, which could extend to the blockchains interacting with ETH.
Decentralized Finance
The decentralized finance (DeFi) space has remained in regulatory limbo for years. However, Ethereum, the leading DeFi platform, could bring the entire DeFi space into the regulatory space, aiding the sector’s growth.
Among the issues plaguing the DeFi space is mainstream adoption, which could happen once Ethereum becomes a fully regulated space. Investing in DeFi might become more straightforward, more user-friendly, and secure.
Some projects that could benefit from this kind of endorsement include Compound, Aave, SushiSwap, and Uniswap, among others.
Layer-ones Might Lose After Ethereum ETFs
While Ether ETF approvals will benefit areas such as layer twos, DeFi, and EVM-compatible blockchains, layer one protocols are set to lose. Layer ones are the protocols that compete against the main Ethereum blockchain, including Solana and Cardano.
Ethereum is the first altcoin to get an endorsement from the SEC. This invalidates the sentiments of other networks known as “Ethereum killers.” Such chains could get left behind once the SEC endorses Ethereum as a commodity.
These developments could renew the sentiment around altcoins. If altcoins can grow in value, so will the DeFi TVL.
Nevertheless, this growth also presents risks, given that most altcoins are still unregulated. Investors should also be cautious to avoid being carried away by the excitement and momentum if the market starts to rally.
