On May 24, U.S. Securities and Exchange Commission (SEC) documents showed that the SEC approved Form 19B-4 for Ethereum spot ETFs from multiple issuers including BlackRock, Fidelity and Grayscale. Former U.S. Securities and Exchange Commission Chairman Jay Clayton said in this regard that the approval of the Ethereum ETF is a two-step process (note: the U.S. SEC still needs to approve the S-1 form). It has been approved for listing, but the approval of the product itself is still pending, although there are still Some issues need to be worked out, but such approval is a given.
In a sense, the Ethereum ETF has essentially been approved. This point of view was reflected in our article "Is the Ethereum ETF ready to come out?" before the Ethereum ETF was approved. The article "Observing the Game between Wall Street and the SEC" made accurate predictions and provided an in-depth analysis of the reasons behind them. However, many people in the market are still confused about the approval of Ethereum, and are too immersed in the approval of the Ethereum ETF and ignore a more important thing. This article will further explain the complex relationship behind this in depth; and based on This further explores the development and impact of Ethereum's market outlook.
Image source: Bitui
Let’s start with the fundamental reasons why Ethereum was approved
A really important event for the crypto industry has been somewhat overlooked because of the approval of the Ethereum ETF. Many people are still confused about the approval of Ethereum, but they don’t know that it is precisely because of the neglect of this important event. So, let’s start with the fundamental reasons why Ethereum was approved.
We are in "Ethereum ETF is about to be launched?" The article "Watching the Game between Wall Street and SEC" believes that Ethereum will be approved for two reasons:
The U.S. SEC and Wall Street have found a "balanced point" for Ethereum's approval - there is no pledge clause in the Ethereum ETF;
But the first reason is not perfect. It is essentially a political reason that prompted the SEC to finally accept this compromise.
The full name of the FIT21 bill is the "21st Century Financial Innovation and Technology Act." On May 23, the U.S. House of Representatives passed the "21st Century Financial Innovation and Technology Act" with 279 votes in favor and 136 votes against, in which the House Democrats performed strongly. The FIT 21 bill was essentially a joint effort by the House Financial Services Committee, which oversees the Securities and Exchange Commission, and the House Agriculture Committee, which oversees the Commodity Futures Trading Commission. This bill will establish a regulatory framework for encryption regulation in the United States, which is very important. Let’s talk about it in more detail below.
The FIT 21 regulatory bill involves many aspects. Let’s first choose a point related to the issue to be discussed in this article to talk about-encryption regulatory boundaries. In the United States, the lines between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) have been blurred as to who regulates cryptocurrencies, the most controversial of which is Ethereum. The CFTC believes that Ethereum and Bitcoin are both commodities, so it launched Bitcoin and Ethereum futures early. For Bitcoin, the SEC has little objection to the asset attributes of Bitcoin, but believes that it is suspected of manipulation. This is the reason why it has been reluctant to launch a Bitcoin spot ETF; however, for Ethereum, SEC officials have been reluctant to launch a Bitcoin spot ETF for a long time. It is believed that after it is converted to a PoS mechanism, it will become a security. This is the reason why the Ethereum spot ETF is not online.
However, FIT 21/HR 4763 clarifies which digital assets are regulated by the Commodity Futures Trading Commission (CFTC) and which are regulated by the Securities and Exchange Commission (SEC). The U.S. Commodity Futures Trading Commission (CFTC) will regulate digital assets as a commodity “if the blockchain or digital ledger it runs on is functional and decentralized.” The U.S. Securities and Exchange Commission will regulate digital assets as securities "if their associated blockchain is functional but not decentralized." The bill defines decentralization as, “among other requirements, that no person has unilateral power to control the blockchain or its use and that no issuer or affiliate controls 20% or more of the digital assets or the Voting rights". From this definition, Ethereum is a commodity, so the SEC’s previous definition of Ethereum as a security does not hold. On May 23, the FIT 21 bill was passed by the House of Representatives; on May 24, the Ethereum ETF was approved, and the cause and effect are already clear.
Finally can go home! Is the Ethereum ETF not a security by representing “many coins”? Solana next?
The far-reaching impact of the Ethereum ETF’s approval
Once the Ethereum ETF is approved, it will not only affect the development of Ethereum, but will also have a profound impact on the encryption industry. Here we briefly talk about the potential balance reached by the SEC and Wall Street.
In February this year, VanEck submitted a revised S-1A document to the SEC that did not include pledge provisions; in recent days, Fidelity and Grayscale have successively removed the pledge part of the S-1 registration statement and resubmitted documents to the SEC. Therefore, we speculate that this "balance point" is: if the Ethereum in the ETF is not pledged, then Ethereum is not a security; otherwise, the Ethereum used for pledge will be defined as a "security." For this reason, the market believes that there is a high probability that other mainstream cryptocurrencies will also have the opportunity to list spot ETFs. Among them, the most optimistic one in the market is $SOL, which means it is also a PoS mechanism. Why can Ethereum do it but $SOL etc. cannot. This view in the market sounds reasonable at first glance, but the SEC has many reasons, such as manipulation and trading fraud? For example, Ethereum is sufficiently decentralized (after all, Ethereum has been around for a long time). If we only speculate on other mainstream cryptocurrencies based on the approval of Ethereum, in fact, other mainstream crypto assets should not launch new spot ETFs so quickly in the short term.
The community is looking forward to it! But is a SOL ETF really possible? JP Morgan: The limit is reached via Ethereum ETF
However, this article actually maintains a relatively positive attitude. This is mainly because of the FIT 21 bill, because this is the bill that really affects the future direction of crypto mainstream assets. The smooth passage of the FIT 21 bill in the House of Representatives is mainly related to the strong support of the Democratic Party. If the Democratic Party wins the U.S. election this year, there is a high chance that the Chairman of the U.S. SEC will be replaced by a Democratic Party member, and he is likely to vigorously promote the encryption industry. moving forward. In addition, this article believes that the United States actually has a relatively obvious advantage in the AI industry, which makes its overall national policy more inclusive and open to technological innovation, thereby ensuring its overall leading level in science and technology, which will undoubtedly make it a high-tech enterprise. Tech’s crypto industry benefits.
Image source: Bitui
How will the market outlook of Ethereum develop?
On May 24, the big crypto V Shenyu said that based on the experience of Bitcoin ETF and public market information, the timeline for Ethereum ETF was as follows: May 23: Ethereum 19 B-4 passed unexpectedly, and market makers began Buy Ethereum spot in preparation for providing liquidity; Early June: S1 may pass. Referring to the Bitcoin ETF, it will take up to 2 weeks, but the normal pace may take 3 months; Mid-June: After S1 is passed, trading may start immediately, or within a few days; June to December: Major capital inflows in the early stage of listing May come from retail investors, accounting for 80-90% of the total funds; institutional users participate less. Considering that ETHE is similar to GBTC, the market may face some arbitrage and selling pressure. Whether it can withstand this selling pressure remains to be seen; after December: Institutional investors may gradually enter the market as time goes by.
This article believes that there is no doubt that Ethereum’s trend will be stronger after the Ethereum ETF is approved. This is mainly due to the increase in demand, but it will not simply replicate the path of Bitcoin’s approval of the Bitcoin ETF. The most important difference is lies in macroeconomic factors. At the beginning of the year, when the Bitcoin ETF was approved, the market actually expected that the Federal Reserve would start cutting interest rates in June, coupled with the strong expectation that the bull market would start after the Bitcoin halving, which undoubtedly greatly promoted the rise of Bitcoin. Although Ethereum has not performed so strongly this year, its gains have actually been relatively high. In the future, its trend will still follow the trend of Bitcoin, and the trend of Bitcoin needs to focus on the policy changes of the Federal Reserve.
However, the market as a whole is currently optimistic about the future of Ethereum. Geoff Kendrick, head of foreign exchange research and digital asset research at Standard Chartered Bank, said: The Ethereum spot ETF is expected to drive inflows of 2.39 to 9.15 million ether in the first 12 months after approval. In U.S. dollars, that equates to roughly $15 billion to $45 billion. The year-end target price of Ethereum is US$8,000, and the price of Ethereum will reach US$14,000 by the end of 2025.
Analysts at Bernstein estimate that approval of an Ethereum ETF would send its price soaring 75% to $6,600. The SEC approved a similar Bitcoin product in January, spurring a 75% rise in Bitcoin prices in the following weeks, and similar price action is expected for Ethereum. Nick Forster, founder of Lyra and former Wall Street options trader, said: "Based on the Lyra options market hints, the chance of Ethereum reaching $5,000 before June 28 is about 20%, and the chance of exceeding $5,500 before July 26 Also 20%.
Summarize
This article believes that the key to the approval of the Ethereum ETF is that the US SEC and Wall Street have found a balance point; and this is due to the shift in US policy, the most important of which is the FIT 21 bill. Although the reason why the FIT 21 bill was approved was mainly driven by the Democratic Party, this article believes that this is mainly related to the shift in national policy in the United States. Along with this, the continued leadership of OpenAI, Google, and Huida in the AI industry has enabled the U.S. economy to maintain resilience. Although this has made the Federal Reserve no longer anxious to cut interest rates, it has also made the U.S. legislators pay more attention to high-tech technologies (especially those related to AI). The closely related blockchain industry) has begun to become more open, inclusive and encourage innovation. This will undoubtedly accelerate the rapid development of the blockchain industry, and the prosperity of the encryption industry may be imminent.
[Disclaimer] There are risks in the market, so investment needs to be cautious. This article does not constitute investment advice, and users should consider whether any opinions, views or conclusions contained in this article are appropriate for their particular circumstances. Invest accordingly and do so at your own risk.
This article is reprinted with permission from: "Foresight News"
Original author: Asher Zhang
