“Hell Has Frozen Over:” How US Politics and Donald Trump Triggered Cryptocurrency’s Historic Breakthrough Amid Ethereum ETF Approval

adminMay 25, 2024

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It’s been a huge week for the U.S. cryptocurrency industry, with two major wins for the industry through the rapid approval of a spot Ethereum ETF and the advancement of legislation designed to provide a clear regulatory framework.

Just a week ago, the former seemed impossible. Bloomberg ETF analysts deemed the odds of approval for the ETH ETF “totally slim.”

“The U.S. House of Representatives’ approval of the Financial Innovation and Technology for the 21st Century (FIT21) Act on May 22 was another major breakthrough. This was possible because only 71 Democrats crossed party lines and joined Republicans in voting for approval. This is the first time that a major cryptocurrency-related bill has been passed by Congress.

JPMorgan analysts said earlier this week that the “sudden reversal in regulatory sentiment” came after “months of stalled talks.” And suddenly, the Securities and Exchange Commission (SEC) was not only again working with fund managers eager to launch Ethereum ETFs, but was actually fast-tracking the approval process.

Ripple Labs CEO Brad Garlinghouse was so shocked by the developments he posted on X that he said, “It feels like hell has frozen over!!”

Big momentum for cryptocurrencies this week – passage of the ETH ETF and bipartisan support for cryptocurrency legislation…
It feels like hell has frozen over!! 🥶 https://t.co/70T0qLt1FH
— Brad Garlinghouse (@bgarlinghouse) May 24, 2024

Ethereum ETF approval is not the most important thing

So what has changed? The answer seems simple. It’s politics.

“It’s not the ETFs that are the most important thing here,” Adam Cochrane, a partner at venture capital firm Cinneamhain Ventures, wrote in a post to X on May 23. “It was a wholesale change of position by the manager that forced Gensler to make concessions.”

The root of this change appears to be Donald Trump’s unexpected dominance of the cryptocurrency vote in the upcoming presidential election. The man who once called Bitcoin a “scam” has not only become “okay” with it, he’s even willingly accepted cryptocurrency donations for his campaign to oust President Joe Biden.

According to a campaign statement, the change was part of a move to build a “crypto army” to counter the “anti-crypto army” led by Biden’s “official representative (Sen. Elizabeth Warren).”

“If you like cryptocurrency, you better vote for Trump,” the former president said.

BREAKING NEWS: 🇺🇸 Donald Trump now officially accepts. #Bitcoin For campaign donations. pic.twitter.com/ySkwNQT1D2
— Bitcoin Magazine (@BitcoinMagazine) May 21, 2024

Trump challenged Democrats after Cardano founder Charles Hoskinson accused them of a “concerted effort to kill cryptocurrencies.”

Avichal Garg, co-founder of Electric Capital warned If Biden sticks to his anti-crypto stance, we’ll see the community of digital asset voters shift from “anti-Zensler to anti-Biden, anti-Democrat.”

Without warning, cryptocurrency made an unexpected debut as a presidential election issue.

The Democratic response is something cryptocurrency industry entrepreneurs have been dreaming of for years. The SEC, which has long plagued the industry with regulatory-specific strategies, began rolling out the red carpet earlier this week for fund managers from BlackRock to Fidelity who applied to launch an Ethereum ETF. And it was approved in just a few days.

What’s next?

Broader mainstream adoption, greater regulatory clarity, and perhaps even a revitalization of the U.S. cryptocurrency industry.

Standard Chartered analyst Geoffrey Kendrick sees this week’s developments as a “watershed” for cryptocurrencies and told The Block that the Solana ETF and XRP ETF will likely follow Bitcoin and Ethereum by gaining regulatory approval in 2025.

“The core technology is so similar to ETH that it would be difficult for the SEC to argue that it is a security given ETH’s position,” he said. “The cryptocurrency industry now appears to have political support on both sides.”

Fund manager VanEck agrees. Matthew Sigel, head of digital asset research, said the improved political backdrop “will likely lead to further wins for digital asset investors and developers, with new laws and courts driving investment in Bitcoin, Ethereum and other open source blockchain software.” This was posted on X. .”

We are very pleased to confirm that the SEC has approved rule changes proposed by our exchange partner, CBOE, for listing and trading under Section 19(b) of the Securities Exchange Act of 1934. @vaneck_us dot #Ethereum CBOE’s ETF! 🥳🚀
TLDR: We expect political improvement… pic.twitter.com/o6ZbFWKExi
— matthew sigel, CFA in recovery (@matthew_sigel) May 23, 2024

There is likely to be greater regulatory clarity now as the cryptocurrency-friendly Commodity Futures Trading Commission (CFTC) is likely to take on a larger role in overseeing the industry. The SEC has now effectively acknowledged that Ethereum is not a security, and passage of the FIT21 Act will give the CFTC more power and funding to oversee digital products.

Simply put, the US cryptocurrency industry has reached its sweet spot after a week of big gains. It seems like it’s been a while since prominent cryptocurrency industry figures warned of the risk of the industry moving out of the United States due to a hostile regulatory regime.

Trump said, “If cryptocurrencies leave the United States because of the hostility toward cryptocurrencies… Well, we’re going to stop it.”