Late last week, the US Securities and Exchange Commission (SEC) cleared the way for the approval of spot Ethereum ETFs.
The SEC approved 19b-4 forms for the ETFs from BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy and Franklin Templeton.
The approval takes Ethereum-based ETFs one step closer to reality. Once available, traditional investors will be able to buy shares that track the price of the second-biggest cryptocurrency.
“Ethereum (ETH) is currently in the spotlight as the SEC asked applicants for the ETH ETF to update their filings this week, increasing the odds of approval,” says Hao Yang, head of financial products at crypto exchange Bybit. “Although ETH has faced challenges in recent months, this move suggests a potential turnaround for the second-largest cryptocurrency.”
The surprise approval is sort of a volte-face at the SEC. In fact, virtually everyone was expecting the SEC to decline the applications.
“The green light for Ethereum ETFs is a landmark decision that highlights Ethereum’s status as a non-security,” says Zina Ashour, founder, Women in Crypto Arabia.
Read | Cryptocurrency market set to surpass $5 trillion in 2024: Ripple CEO
She explains that this distinction is pivotal “as it exempts Ethereum from the strict regulations that govern traditional securities, thereby broadening the avenues for both institutional and retail investment”.
Broader impact
Ashour believes the SEC’s move could set a precedent for the classification and regulation of other cryptocurrencies in the future.
“The SEC’s endorsement of Ethereum ETFs marks a significant turning point not only for Ethereum but also for the wider cryptosphere,” says Ashour.
She argues the approval will drive the entry of institutional investment into Ethereum. The Ethereum ETFs, Ashour explains, will take away the complexity of directly purchasing and storing the crypto. Secondly, they’ll also offer a regulated and familiar path for investors to buy the crypto. This leads Ashour to believe that Ethereum ETFs could potentially have a positive impact on Ethereum’s price.
“Moreover, the Ethereum ETFs could amplify market liquidity by drawing in more participants,” says Ashour. “Enhanced liquidity could stabilize prices and temper volatility, rendering Ethereum a more attractive investment proposition.”
She also points out that there are over 20,000 altcoins in Ethereum’s ecosystem. “The approval of Ethereum ETFs could indirectly influence these altcoins, potentially sparking increased interest and investment in them,” argues Ashour.
Open the floodgates
SECs approval of the Ethereum ETF forms follows approval of spot Bitcoin ETFs back in January. These spot Bitcoin ETFs now collectively hold more than 1 million Bitcoin, worth over $70 billion.
Read | Bitcoin ETFs approval: A game-changer for cryptocurrency market
As the news of the approval made its way into the markets, the price of Bitcoin and Ethereum actually dropped. Experts believe this was the classic case of traders selling the news after buying the rumor, earlier in the week.
While the price of both cryptos has gone up since, Yang believes the prices will continue to fluctuate until the ETF decision is finalized.
Interestingly, market analysts believe the approval of Ethereum ETFs could open the door to more crypto-based ETFs. In a note last Friday, Geoffrey Kendrick, Standard Chartered’s head of crypto research and emerging market foreign currencies, speculated that Solana and XRP might soon get their own ETFs.
Changing political winds
The SEC approval of the Ethereum ETFs is just the first step of a long-winded process. Experts estimate that could take weeks, or even months, before the actual ETFs land on the trading floor.
The Ethereum ETF approval is being hailed as a symbolic victory for crypto. Looking at the bigger picture, many believe SEC’s change of heart has everything to do with politics in the US.
Read | Economy Middle East Guide: Regulated crypto exchanges
“The broader political landscape also favors a friendlier regulatory environment for crypto, driven by younger voters’ preferences, which could lead to improved crypto-government relations,” says Yang.
A recent survey by Harris Poll bodes well for crypto going forward. It finds that a third (33 percent) of US voters will evaluate a candidate’s position on crypto before voting. An overwhelming majority (77 percent) think a U.S. presidential candidate should know crypto.
Reportedly, even Ethereum co-founder Joe Lubin believes the approval of the Ethereum ETFs, and the crypto-friendly political environment in the US is a “game changer”.
For more technology news, click here.