Could Bitcoin ETF approvals spark memecoin bull run?

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The market has responded positively to the approval of multiple spot Bitcoin exchange-traded funds (ETFs) in the United States, but a parabolic crypto bull run hasn’t happened yet. 

Should strong upward price pressure push Bitcoin (BTC) to new heights in the near future, will the memecoin market take advantage? Experts are conflicted.

Historically, when Bitcoin grows, the rest of the market — including altcoins and memecoins — grows along with it. This time, the market is infinitely larger with more projects, layer 1s, layer 2s and memecoins than ever before.

On Dec. 22, 2023, noncustodial wallet provider Web3Auth reported, “Around 5,000 memecoins were launched on Solana today.” This is just one blockchain in one day. With such an enormous market, any benefits of additional capital inflows will spread more thinly than ever before.

Talking to Cointelegraph, Jupiter Zheng, partner, liquid fund and research at investment firm HashKey Capital, said that a spot Bitcoin ETF might not be the great market mover some crypto investors are hoping for. As Zheng explained, the real driver of memecoin wealth comes from its people:

“Community is what really drives memecoin mania. So the spot [Bitcoin] ETF isn’t enough on its own to cause a gold rush of successful memecoins.”

Despite this, Zheng believes the industry should prepare for a wave of memecoin mania just in case. Creating memecoins is becoming easier than ever, and the combined pressures of fresh capital inflows, increased network usage and a raft of additional coins will test the robustness of blockchain networks.

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In a post-ETF world, Zheng said, “If funds start flowing into alternative layer-1 and layer-2 projects, it becomes crucial to address the infrastructure needs to retain users and ensure successful product delivery.”

In summary, even if a spot Bitcoin ETF does not guarantee a memecoin bull run, the sector should act as though it will. Failure to do so could kill any bull run in its crib.

Watch out, the bull run is coming

As some industry players play down a spot Bitcoin ETF, others believe the memecoin bulls will have their day.

Chen Arad, chief external affairs officer at Web3 security firm Solidus Labs, told Cointelegraph that a memecoin goldrush is expected:

“The ETFs are generating increased interest and credibility for crypto, which will definitely translate to the memecoin space as well. We’re likely to see increased volumes over time across the board, including for memecoins.”

Arad warned that it’s not all good news, stating that the mania likely to grip the market also creates the perfect conditions for scammers to ply their unscrupulous trade.

“The ETFs are creating enormous buzz and FOMO [fear of missing out], which unfortunately can easily be used by scammers and manipulators,” said Arad.

The security expert said that he is already seeing an increase in certain types of scam activity related to ETFs.

“Our team and our TokenSniffer solution have been identifying a spike in scam tokens that try to create fake coins and rug-pull scams using the names of ETF issuers and the ETFs tickets to attract investors in an attempt to steal their funds. We advise to always be careful when investing in crypto and specifically memecoins, especially in times of increased buzz since buzz and FOMO are a scammer’s best friend,” Arad added.

Taking the insider view

There may be reasons to be cautious about what a bull run could bring, but there are lots of reasons for hopeful optimism, too.

The CEO of Avalanche memecoin Husky Avax, known by the pseudonym Paps, is among those looking at the positives. Paps told Cointelegraph that the spot Bitcoin ETFs will help to shift public perceptions on cryptocurrency as the industry becomes mainstream.

“I think that ETFs are a great tool for the mass adoption of cryptocurrencies and blockchain. It is an institutional validation that [blockchain] technology has intrinsic value. Moreover, it is a radical change in the image that these assets can have with the general public,” he said.

“Beyond Bitcoin, Ethereum is now in the spotlight, and perhaps even AVAX,” Paps added. “As a result, the [decentralized finance] ecosystem could benefit. I am convinced that memecoins will play a major role in the democratization of DeFi once the light is installed through ETFs. We have already seen memecoins become mainstream like Doge or Shiba.”

While Paps believes that the spot Bitcoin ETFs will be good for memecoins, he highlights that this is not always the direction of travel.

“I know several people who have not bought Bitcoin or Ethereum but have still bought these memecoins,” he said.

What Bitcoin did after ETF approval

On Jan. 10. the United States Securities and Exchange Commission (SEC) approved the first spot Bitcoin ETFs. According to data on CoinGecko, this caused a Bitcoin spike from $44,684.82 on Jan. 10 to $48,494.62 on Jan. 11, representing an 8% rise. Bitcoin has since retraced to $43,136.63

Three-month BTC price chart. Source: Cointelegraph

While Bitcoin’s price performance may not constitute the parabolic rise some had hoped for in the wake of the SEC’s ETF approval, BTC is still performing well.

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Should the market kick up a gear, it will create a new dynamic for industry insiders and consumers. With that comes its own challenges, but most agree that bull market challenges are far better to deal with than bear market challenges.