The SEC is expected to defer approval of new spot Ethereum ETFs, like Bitcoin ETFs, until the end of May. VanEck CEO Jan van Eck said he thinks the SEC will most likely reject the firm’s ether ETF application. In the Paris Blockchain Week crypto event in France, Jan van Eck told in an interview,
We were the first to file as well for ethereum in the U.S., and we and [Ark Invest CEO] Cathy Wood, are kind of the first in line for May, I guess, to probably be rejected.
Eric Balchunas, an ETF analyst for Bloomberg, stated, “While it may seem like this is them getting their docs in shape based on SEC comments (which would be good news), there haven’t been any comments. So it’s either a Hail Mary or trying to give the SEC one less thing to use in their rejection. Balchunas believes the SEC did not prompt the change, suggesting it is a preemptive action to increase the likelihood of acceptance.
Also Read: Franklin Templeton Files for Spot Ethereum ETF Launch, Awaits Approval
Regulatory landscape
There are high chances for the regulatory framework to impact the approval process of spot Ethereum ETFs. Grayscale submitted their application in September, shortly before the other ether futures ETFs began trading, but the SEC postponed deciding on it. It was scheduled to issue a final decision on May 30.
Grayscale’s plan to transform its existing Grayscale Ethereum Trust into a spot ether ETF is pending. Despite these delays, the licensing of spot Bitcoin ETFs and futures-based Ethereum ETFs has heightened expectations for spot Ethereum equivalents.
SEC Chair Gary Gensler suggested that the agency’s clearance for spot Bitcoin ETFs was restricted to a single cryptocurrency. Ethereum switched to a proof-of-stake consensus method in September 2022, through the dubbed “The Merge,” update.
Analysts previously projected that spot Ethereum ETFs would be allowed by May 2024. However, these hopes were crushed owing to a lack of movement. Grayscale’s Ethereum Trust saw a markdown, indicating a bearish market outlook. Bitwise CIO Matt Hougan stated that a delayed launch could result in more significant inflows.
Hurdles with the SEC
Spot Ethereum ETFs allow investors to gain ether (ETH) exposure without purchasing or holding the cryptocurrency. They follow the real-time price of ether by keeping the cryptocurrency in their reserves, as opposed to futures-based ETFs, which rely on contracts. However, there are hazards associated with spot Ethereum ETFs, such as possible fees and trading limited to the ETF’s market hours.
Also Read: Ethereum ETF Approval Hopes for August, Bitcoin Struggles Continue
A Brief Study about Spot Ethereum ETFs
Understanding ETH ETFs
A spot Ethereum ETF is a legal financial vehicle that tracks the value of ether, with management institutions acquiring and storing it in their reserves. It will be listed on a stock market, allowing investors to purchase and sell shares, indicating ownership of the underlying ether and exposing them to price changes.
Characteristics and Benefits
- Improved accessibility: Ethereum ETFs may make it easier for investors, mainly those unfamiliar with cryptocurrencies, to invest in Ethereum.
- Reduced volatility: Ethereum is a volatile asset, but Ethereum ETFs may mitigate volatility by pooling investor funds and investing in a portfolio of Ethereum futures contracts.
- Increased liquidity: Ethereum ETFs might increase liquidity in the Ethereum market, making it simpler for investors to acquire and sell Ethereum.
- Institutional adoption: Ethereum ETFs may help draw institutional investors to Ethereum, resulting in more demand and higher prices.
Ethereum ETF’s Impact on The Price of ETH
If the spot Ethreum ETF got approved the market might witness price movements on the chart. Earlier the approval of spot Bitcoin ETFs has altered the Bitcoin’s cycle. Many experts believe that the funds flowing into ETFs has drive Bitcoin to touch an ATH on March 14, 2024, which was a month before to its halving date.
The submission of Ethereum Spot ETF applications has substantially influenced the crypto market, with an 8% surge in Ethereum’s market value. This gain indicates the market’s expectation of easier access to Ethereum. Grayscale, which has a pending Spot ETH application with the SEC, now controls around $5 billion in ETH, accounting for roughly 2.5% of the circulating supply. If accepted, this ETH will be transferred into the ETF product.
However, the market has also seen volatility, with Ether plunging more than 14% in a week in early April. Despite these changes, ETF developments are expected to substantially influence Ethereum’s price dynamics, which is comparable to Bitcoin Spot ETF approvals. The recent legalization of bitcoin ETFs has sparked expectations for more investment inflows and greater acceptance of cryptocurrencies.
Difference between spot Ethereum ETFs and Future ETFs
| spot Ethereum ETFs | Future ETFs |
| Direct Ownership: Spot Ethereum ETFs provide direct ownership of ether, which means the fund owns the underlying cryptocurrency. This may appeal to investors who want direct exposure to ether’s price swings. | Speculative Opportunities: This ETF lets investors obtain exposure to ether via futures contracts, which can provide speculative possibilities. However, this comes with additional complexity and danger. |
| Simplicity: Spot Ethereum ETFs have a clear structure: they follow the spot price of ether. Investors do not have to understand the complexity of futures contracts. | Market Dynamics: Ethereum futures ETFs may be impacted by the futures market’s structure, roll yields, and contract term structures. |
Impact on Future Market
The approval of spot Ethereum ETFs might have a big influence on the cryptocurrency market. It could marka watershed moment in Ethereum’s mainstream adoption and legitimizing the asset class. This would improve Ethereum’s liquidity and trading volume as investors seek exposure through ETFs. This flood of wealth has the potential to push up prices and promote broader adoption within the Ethereum ecosystem.
Furthermore, spot Ethereum ETFs might set off larger market movements, impacting the pricing of other cryptocurrencies and generating a new wave of investment. As Ethereum’s popularity rises, its position in decentralized finance and the blockchain ecosystem may become even more prominent.
Conclusion
The introduction of spot Ethereum ETFs is expected to substantially influence Ethereum’s pricing and market dynamics, making it simpler for investors to obtain exposure to ETH. While the legal landscape remains challenging, with the SEC postponing judgments, a possible infusion of investment might result in significant price hikes and increased adoption of Ethereum.
