Ethereum’s tailwind: How SEC ETF approval fueled the memecoin frenzy

Bitcoin ETFs, most notably BlackRock’s IBIT, have been the fastest-growing ETFs to date, reaching $20 billion in just 137 days. In comparison, the next closest, JEPI, took nearly 1,000 days to achieve the same milestone. Now that the money men have tasted blood, and an Ethereum spot ETF is set to be listed, there are some interesting developments in the crypto market.

While the primary impact is directly on Ethereum, a fascinating secondary effect has occurred – a surge in the valuations of memecoins built on the Ethereum blockchain. Let’s understand how this development is affecting the memecoin landscape and what it means for the future.

Memecoins, often known for their viral appeal and sometimes questionable utility, have seen significant price increases following the Ethereum ETF announcement. Notable memecoins like Dogecoin (DOGE) and Shiba Inu (SHIB) experienced double-digit percentage growth, while less well-known tokens like Floki Inu (FLOKI) and Dogelon Mars (ELON) skyrocketed by even greater margins.

Why the Ethereum ETF Impact?

Several factors contribute to this phenomenon. The approval of Ethereum ETFs reflects the growing mainstream acceptance of cryptocurrencies. It is also a major development in the industry following the approval of Bitcoin ETFs, which saw a large amount of institutional money inflows. This could attract new investors, especially those with a risk appetite who may explore the memecoin as a volatile but potentially high-reward entry point into the Ethereum ecosystem.

The ETF strengthens trust in Ethereum as a blockchain among users which partly reflects interest and enthusiasm in memecoins built on Ethereum. Compared to memecoins on alternative blockchains such as Solana, Ethereum’s established developer community, network security, and scalability efforts (such as Ethereum 2.0) provide a perceived edge.

A Look at the Major Ethereum Memecoins

Dogecoin (DOGE): One of the OG memecoins, DOGE has seen renewed interest thanks to Elon Musk’s support. While its utility remains debated, its brand recognition and loyal community are expected to benefit from the Ethereum ETF tailwind.

Shiba Inu (SHIB)SHIB, known as the “Dogecoin killer,” has also enjoyed a surge in price. Its efforts to create a decentralized ecosystem with its SHIB token, Shibarium Layer 2 blockchain, and LEASH governance token could attract investors seeking a more feature-rich memecoin experience within the Ethereum network.

Floki Inu (FLOKI)Inspired by Elon Musk’s dog of the same name, FLOKI positions itself as a memecoin supporting various charitable causes. The Ethereum ETF impact, combined with FLOKI’s community-based initiatives, could attract impact-driven investors looking to invest in the memecoin.

Dogelon Mars (ELON): This space-themed memecoin referencing Elon Musk’s Mars ambitions has seen significant gains. While its long-term viability still remains to be seen, current market sentiment supports this token as a part of the overall market gains.

Long-term effects: a speculative future

The long-term impact of Ethereum ETFs on memecoins remains a gray area. While the current surge indicates renewed interest, memecoins are inherently volatile and prone to market corrections. Their long-term success depends on developing real utility beyond mere hype, something that can be achieved by clear community guidelines and consensus, and of course, a solid regulatory framework.

The approval of an Ethereum ETF gives Ethereum-based memecoins a temporary advantage over memecoins that exist on Solana. While Solana offers faster transaction speeds and lower fees, Ethereum’s established reputation and developer base currently have a greater influence on market sentiment. However, as market dynamics evolve and Solana continues to grow, this advantage could change.

Institutional interests: A long way off?

Reputation risk and uncertainty aside, institutional interest in memecoins is not entirely inexplicable. Despite their volatility, some memecoins boast massive market capitalizations and active communities. Institutions may see the potential for controlled risk to capture some of this growth. A small allocation of memecoins could serve as a diversification tool in their broader portfolios. Some memecoins are exploring ways to develop utility, such as integrating with decentralized finance (DeFi) protocols or play-to-earn gaming platforms. This could attract institutions seeking exposure to these emerging trends. If memecoins gain widespread mainstream acceptance, like the gaming community or other metaverse projects, and demonstrate long-term sustainability, institutional attitudes could change.

Memecoins: The Flavor of the Season

In May alone, 455,000 tokens were launched on Solana. During the same month, 177,000 tokens were introduced on Base, while Optimism and Arbitrum each launched 20,000 new tokens. Most of them were memecoins. Almost everyone understands that investing in meme coins is gambling. In a casino, one gambles against the house, everyone knows the house always wins. Many people view the stock market in a similar way, which is why GameStop and ‘Roaring Kitty’ gained popularity—because it felt like one was sticking the house. However, people believe the house always wins. Meme coins, on the other hand, offer a different dynamic. They offer a sense of peer-to-peer competition rather than betting against the house. It’s more about competing with fellow enthusiasts, which is a more exciting and less frustrating game. Its PVP (player versus player) nature makes people feel like they have a chance. These activities are not governed by Wall Street lawsuits, which further increases their appeal. It is a way to rebel against a system that is perceived to be rigged against the average investor.

conclusion

The SEC’s approval of an Ethereum ETF has led to an unexpected but fascinating outcome – a resurgence in Ethereum-based memecoins. While the long-term viability of these tokens is uncertain, current market sentiment favors established blockchains like Ethereum. This, along with a potential influx of new investors, has led to a short-term boost for these memecoins. However, for the excitement to continue, these tokens will need to move beyond mere internet hype and demonstrate concrete utility.