Bitcoin and ether or bust

Crypto enthusiasts rubbing their hands in expectation of a flood of liquidity coming now that the world's two largest digital assets have been legitimized via ETF, might be waiting a while.

Why it matters: Unlike previous cycles in which a bullish wave in crypto lifted all coins, this time there will be more participants "left on the sidelines," EY's global blockchain leader, Paul Brody, tells Axios.

Between the lines: Bitcoin and ether have always had the deepest, most liquid markets among cryptocurrencies, Brody notes.

• That's the reason both are now in ETFs. Their now being in ETFs doesn't change the dynamic across the wider cryptocurrency industry.
• The tendency for all assets to rise in previous bullish cycles was more an "isolated phenomenon," than a tendency borne to repeat, he says.
• In the last cycle, people were able to raise money for different blockchain networks that were issuing tokens. That's not happening as much now.

By the numbers: BBitcoin is up 47% this year compared to ether's 34% gain, according to Messari.

• Meanwhile, the year-to-date performance of alt coins as a whole hasn't been hot.
• A Messari screen of 100 such tokens ranked by market cap shows many more in the red than not this year, but there are exceptions. (Think: Solana and Toncoin.)

To be sure, the speculation around ETFs, when they will launch and what it means has been the focal point for the industry for much of the year.

Zoom in: Will the ETF party keep going? Brody doesn't think every token will get an investment wrapper, in part because of regulators' tests for whether a digital asset should be allowed one.

• "They look at how liquid is the market, how good is the pricing, and whether there's capacity for the flows of money," he says.
• "Bitcoin was the first to really be able to assertively and confidently say 'yes' and it's not clear to me that lots of other crypto assets can meet that standard."

State of play: It's the bitcoin and ether show now.

Yes, but: There's still a gap in what people know about ether, according to Brody.

• 🍊 BTC behaves like digital gold, or "what people hope is that it is not correlated with the economic cycle" and unaffected by government policies — effectively a hedge against inflation, say, he said.
• "Ethereum is totally different. It's a tech platform, that effectively has, with staking and transaction fees, a modelable cash flow."

The intrigue: 👯 That might explain why bitcoin and ether sometimes seem to march together price-wise, he added, though they really shouldn't.

• Brody's hypothesis for why: "Most people, the vast majority of retail buying this, are not yet thinking about the next layer."
• "Instead of 'OK, what am I going to use Ethereum for?' they think Ethereum is like bitcoin's little brother."