Crypto ETFs are on the rise. However, the wait could be longer for the XRP and Cardano communities. A recent GSR study reveals lackluster scores for both assets, suggesting the likelihood of XRP and Cardano ETF approvals remain low in the near future. This analysis, based on strict decentralization and demand criteria, reveals significant structural weaknesses that limit their ETF potential.
ETF approval hurdles for XRP and Cardano
The recent release of GSR’s ETF Probability Score highlights the challenges facing cryptocurrencies XRP and Cardano. The assessment focuses on two main areas: decentralization and demand, each of which plays a very important role in the viability of ETFs.
Decentralization is a complex concept that includes permissionless participation, development management, token distribution, and hardware diversity. For XRP and Cardano, the decentralization score is particularly low, with -0.9 for XRP and -0.1 for Cardano, placing them last and fifth among the ranked cryptocurrencies. These scores indicate structural vulnerabilities that could compromise their ability to provide the security and resilience needed for ETFs.
At the same time, demand is measured using indicators such as market capitalization, trade volume and community activity. Here again, XRP and Cardano show disappointing results with scores of -0.2 and -0.5, which are fourth and sixth respectively. These low demand scores for these two cryptocurrencies reflect market dynamics and community attractiveness that are not robust enough at this stage to support the creation of an ETF.
Strengthening decentralization and demand: a necessary step
GSR’s ETF Probability Score assigns a weight of 33% to decentralization and 67% to demand. And the results from their study highlight cryptocurrencies like Ethereum, Solana and NEAR significantly outperforming XRP and Cardano in these criteria, highlighting the higher likelihood of ETF approval for these more established and established assets. However, this does not mean that the situation is static.
Decentralization, while difficult to improve, remains an area where progress is possible. For XRP and Cardano, increased permissionless, better distribution of cryptocurrencies and increased diversification of hardware used to secure the network could strengthen their position. Plans to increase decentralization must be supported by clear policies and concrete measures to win the confidence of regulators and investors.
On the demand front, the increase in market capitalization, higher trading volume of the two cryptocurrencies and increased community activity are key. These elements can be driven by technological innovation, strategic partnerships and wider adoption of their respective platforms. Actively engaging with the community and creating real-world use cases can also play an important role in driving demand.
Luc Jose A.
A graduate of Sciences Po Toulouse and holder of the blockchain consultant certification issued by Alyra, I joined the Cointribune adventure in 2019. Convinced of the potential of blockchain to transform many sectors of the economy, I made a commitment to raise awareness and inform the general public about this ever-evolving ecosystem. My goal is to enable everyone to better understand blockchain and take advantage of the opportunities it offers. Every day I try to provide an objective analysis of current events, decipher market trends, convey the latest technological innovations and put into perspective the economic and social problems of this ongoing revolution.
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The comments and opinions expressed in this article are solely those of the author and should not be considered investment advice. Before making any investment decision, do your own research.