Spot Ethereum exchange-traded funds are here.
Trading kicked off this morning in pre-market trading in New York.
Volume is “significantly lighter than pre-market trading of Bitcoin ETFs on launch day,” said Matt Hougan, chief investment officer at crypto index fund manager Bitwise, posted on X. “Still, good to see trading activity in the biggest expected players pre-market.”
Nine different ETFs — issued by BlackRock, Fidelity Investments, Grayscale Investments, VanEck, Invesco and Galaxy Digital, 21Shares, Hashdex, Franklin Templeton, and Bitwise — have now hit the market.
Combined, these issuers have more than $15 trillion in assets under management, according to Bloomberg Intelligence ETF analyst Eric Balchunas.
And they’re rolling out the red carpet for crypto, said Bloomberg ETF analyst Eric Balchunas, noting BlackRock’s web page to explain Ethereum to its investors.
“This kind of first class TradFi treatment — translating benefits into Boomer-ese and and delivering it in the most preferred investment vehicle on Planet (the ETF) is a major deal,” Balchunas said.
Though the SEC informally approved the Ethereum ETFs on May 23 when it finalised a batch of crucial documents, called 19b-4s, with prospective issuers, the products were only made “effective” on Monday, after the agency dealt with another set of filings, called S-1s.
Price impact
The approval process for spot Bitcoin ETFs fueled a monster rally for the top cryptocurrency, but Ethereum didn’t experience the same kind of hype.
The price of Ether surged almost 20% in a day in May following news that the SEC was going to greenlight the products, but it failed to breach its yearly high of $4,100.
Some market watchers expect the launch of Ethereum ETFs to change that. QCP Capital says the event could trigger a 60% rally for Ethereum.
Others are more sceptical.
The “expectations of crypto natives are overinflated and disconnected from the true preferences of TradFi allocators,” Andrew Kang, managing partner at investment firm Mechanism Capital, wrote on X.
Ethereum “has much less buy-in as a key portfolio allocation for many large groups of non-crypto-native capital,” Kang said.
Bernstein analysts have taken a kind of middle ground, arguing that things may be tough in the short term, but that the ETFs were certainly bullish long term.
The argument is that Ethereum ETFs pave the way for Ethereum to become a primary network for the tokenisation of traditional assets — something financial powerhouses like BlackRock are particularly interested in.
Roller-coaster process
The crypto industry clamoured for Ethereum ETFs almost as soon as their Bitcoin counterparts were out the door.
Instead, it faced months of radio silence from the SEC, leading to speculation that the markets watchdog would reject the products.
The impression was that SEC chair and staunch crypto critic Gary Gensler had begrudgingly approved Bitcoin ETFs after losing a court case against Grayscale.
The asset manager had fought against the regulator to convert its Grayscale Bitcoin Trust into a spot Bitcoin ETF, and with a federal appeals court siding with Grayscale, Gensler was forced to acquiesce.
No such case existed to support an Ethereum ETF.
Moreover, Gensler’s refusal to clearly state whether Ether was a commodity or a security made the launch of an Ethereum ETF seem even more unlikely.
That view was compounded by the SEC launching an investigation into the Ethereum Foundation and other Ethereum-affiliated organisations, like Consensys and Uniswap.
But on May 20, only three days before a crucial deadline for approval or denial, the agency suddenly began communicating with prospective issuers.
Industry leaders, like Galaxy Digital CEO Mike Novogratz, mostly pinned the SEC’s change of heart on shifting political winds in Washington in the wake of former president Donald Trump — traditionally crypto agnostic — cozying up to the industry ahead of the presidential election.
But the SEC’s U-turn was so sudden that it took its own staff by surprise, analysts said.
Bitcoin ETFs saw both 19b-4 and S-1 filings approved at the same time.
Ethereum ETFs, on the other hand, saw their 19b-4s finalised first, and the division of Corporate Finance, which takes care of S-1s, took almost two months to play catch up.
That’s the reason why the products were confirmed in-all-but official terms when the 19b-4 filings were finalised in late May, but haven’t launched until now.
Tom Carreras is a markets correspondent for DL News. Got a tip about Ethereum ETFs? Reach out at tcarreras@dlnews.com
