Bitcoiners’ dilemma. Many crypto assets surged early last week after it became clear that Ethereum would receive one-time ETF approval and its long-awaited regulatory clarity as non-security, but this development took the wind out of the water for investors. sails of the Bitcoin ecosystem. What is going on?
Although BTC made dollar gains amid ETH ETF approval odds, last week marked the worst performance in BTC dominance since the arrival of spot BTC ETFs led to redemptions massive for the Grayscale Bitcoin Trust (GBTC) in January.
If carried out today, the Ethereum Initial Coin Offering (ICO) would constitute an illegal security offering; The precedent set by the approval of the ETH ETF in light of this fact highlights that any crypto asset – regardless of its origin story – can become unsafe and deals a blow to doctrines that BTC was in a unique position for regulatory capture.
The Saylor Doctrine is over. Bitcoin is not special because of regulatory capture. Laser eyes cheering for the SEC lost today. Bitcoin's success is not predetermined and it still needs to be competitive in the free market and in the technology space. https://t.co/I1gyO4WQVC
– nic carter (@nic__carter) May 20, 2024
Losing this defining characteristic not only weighs down BTC, but also significantly impacts the performance of many associated ecosystem tokens.
Although Bitcoin remains the oldest blockchain in existence, its non-security status is no longer a significant differentiator when considering alternative crypto investments and forces the ecosystem to compete more on its technological merits.
Unfortunately, Bitcoin's historical resistance to technological change, seeking ultra-hard money above all else, has resulted in a degraded user experience and forced developers to adopt workarounds to deploy applications, leading the network to a low score in this category…
Assets created using native Bitcoin standards such as Ordinals, BRC-20, and Runes had already attracted immense interest from investors looking for greater upside potential in BTC, but it is difficult to interact with and have no value beyond speculation.
Developers have attempted to imbue the Bitcoin network with enhanced utility via layer 2s, however, existing solutions are just side chains that do not inherit any security from the base layer consensus.
Recognizing that BTC is not in a unique position to be the only asset with clear regulation and access to TradFi, market participants appear to be turning away from BTC-related tokens, as evidenced by the immense weakness faced by many of these tokens compared to their native Ethereum. counterparts.
Despite the outsized rise these tokens have experienced at times, the loss of the regulatory capture narrative should lead these investments to trade in line with their fundamentals at valuations comparable to applications on other chains.