On July 23, according to official information from the SEC, it has officially approved the S-1 applications of multiple ETF issuers, and the Ethereum spot ETF has been officially approved for listing and trading. Initial trading is expected to begin tomorrow (Tuesday morning US time, tomorrow night Beijing time).
The SEC has notified at least two of the eight companies that have applied to launch the first U.S. spot Ethereum ETFs that their products can begin trading on Tuesday, according to the notification. Products from BlackRock, VanEck and six other companies will begin trading on three different exchanges on Tuesday morning: the Chicago Board Options Exchange (CBOE), Nasdaq and the New York Stock Exchange, all of which confirmed that they are ready to start trading.
This represents another milestone for the crypto industry, and institutions and analysts in the crypto industry have expressed their views.
Cryptocurrency trading platform Coinbase officially announced that today, the U.S. Securities and Exchange Commission (SEC) approved the application of 9 spot Ethereum ETFs. Following the approval of the spot Bitcoin ETF by the U.S. SEC in January this year, the approval of the spot Ethereum ETF marks another important milestone for cryptocurrency, reflecting the continued innovation and increasingly mature regulatory environment around crypto assets. Coinbase has also become a trusted partner and custodian of 10 Bitcoin spot ETFs and 8 newly approved Ethereum spot ETFs.
Eric Balchunas, an ETF analyst at Bloomberg, said in a post on social media, “Jay Jacobs, head of U.S. thematic and active ETFs at BlackRock, said in a video introducing Ethereum to ordinary people that while many people believe that the main attraction of Bitcoin lies in its scarcity, many people also believe that the attraction of Ethereum lies in its practicality. You can think of Ethereum as a global platform for applications that can run without decentralized intermediaries.”
Farside Investors, a London-based investment management company, released a report saying, “We believe that the inflow of funds to Ethereum ETFs may be smaller than that of Bitcoin ETFs for the following reasons: Bitcoin ETFs were approved first and attracted more attention; before the approval of US spot ETFs, the market size of Bitcoin exchange-traded products (ETPs) was larger than that of Ethereum; the lack of a pledge function makes Ethereum ETFs relatively less attractive; Bitcoin is more relevant as a financial asset, while Ethereum focuses more on decentralized applications (dApps) and on-chain use.”
Market maker Wintermute believes that the Ethereum ETF could attract up to $4 billion in inflows from investors over the next year. Wintermute predicts that driven by these inflows, the price of Ethereum could rise by as much as 24% over the next 12 months.
As of the time of writing, the price of Ethereum was $3,445, down 2.5% in 24 hours. The positive news of the approval of the Ethereum spot ETF seems to have been realized ahead of schedule.
Ten years ago on July 22, 2014, Ethereum officially launched ICO financing. The team raised funds by pre-selling ETH and raised a total of 31,529 bitcoins (the exchange rate was 1 bitcoin for 2,000 Ethereum). According to the market price at the time, the funds raised exceeded US$18 million.
Two months ago, the Ethereum spot ETF went from being unpopular with only a 7% approval rate to an approval rate that soared to 75% overnight. In the early morning of May 24, the U.S. Securities and Exchange Commission approved the 19b-4 forms of multiple Ethereum spot ETFs, including those from BlackRock, Fidelity and Grayscale.
Today, the Ethereum spot ETF was officially approved for listing and trading. The Chicago Board Options Exchange (CBOE), Nasdaq and New York Stock Exchange are all ready to trade the Ethereum spot ETF.
What difficulties did the Ethereum spot ETF overcome?
Securities attributes and POS concerns
In the past six months, the approval progress of the Ethereum ETF has been a concern of the community. After this approval, several previous negative opinions have also been responded to one by one. Unlike the Bitcoin ETF, the approval of the Ethereum ETF has experienced many obstacles.
Since Ethereum conducted an ICO in 2014 to raise funds, this financing behavior makes ETH likely to be regarded as an asset with security properties. In addition, since Ethereum theoretically has no upper limit on the total amount. Under the PoS mechanism, the additional issuance of ETH is related to network activity. The behavior of large fund holders may cause ETH price fluctuations. According to previous statistics from Glassnode, nearly 55% of the ETH supply is held by 1,041 addresses. These addresses can Significantly affects the upgrade and operation of the Ethereum network.
This also makes the SEC believe that the high concentration of ETH holders will increase the risk of market manipulation. Alex Thorn, head of research at Galaxy Digital, was pessimistic about the approval of the Ethereum ETF based on this.
According to Alex's report, after Ethereum switched to a new governance model called "Proof of Stake (POS)" in September 2022, the U.S. Securities and Exchange Commission (SEC) launched an investigation into the Switzerland-based Ethereum Foundation.
Although "proof of stake" can help Ethereum get rid of the defect of energy waste and use a model that relies on a trusted validator network, it actually provides the SEC with a new excuse to try to define Ethereum as a security.
As a compromise, companies applying for ETFs such as Ark Invest, 21Shares, and BlackRock have deleted the pledge part in their ETF proposals, indicating that they will not pledge part of the trust's assets. This measure reduces the risk of ETH being considered a security, because staking may involve expectations of future returns, which is precisely a feature of securities attributes.
Prelude to Hong Kong Ethereum Spot ETF
Looking back at the crypto market this year, Ethereum is very weak compared to the strength of Bitcoin. Its price and growth rate were not as good as Bitcoin before, and not as good as altcoins later. During this period, Hong Kong gradually changed its policy stance to be more friendly to cryptocurrencies, which made its Ethereum spot ETF approved before the United States, which brought huge benefits to Ethereum.
On April 15, 2024, the Hong Kong Securities and Futures Commission officially announced the list of approved virtual asset spot ETFs, including the Bitcoin spot ETF and Ethereum spot ETF under China Asset Management (Hong Kong), Harvest Asset Management, and Bosera International.
These six spot ETF products opened for new subscription from April 25 to 26 and were listed on the Hong Kong Stock Exchange on April 30. This is also the first time that the Ethereum spot ETF has landed on a major exchange.
Currently, Hong Kong spot cryptocurrency ETFs are mainly issued simultaneously by China Asset Management (Hong Kong), Bosera Funds (International) and Harvest International, including Bosera HashKey Bitcoin ETF (03008), Bosera HashKey Ethereum ETF (03009), China Asset Management Bitcoin ETF (03042), China Asset Management Ethereum ETF (03046), Harvest Bitcoin Spot ETF (03439) and Harvest Ethereum Spot ETF (03179).
According to the community's research and analysis, the reason why Hong Kong approved the Ethereum spot ETF earlier than Europe and the United States is not only due to its flexible regulatory environment and open attitude towards financial innovation, but also influenced by key factors such as strong market driving force, geographical and strategic advantages, and the first step to seize pricing power.
Although many community members were not optimistic about this matter at first, believing that it would not work from a market perspective, the US SEC has now changed its attitude towards Ethereum and approved VanEck's application. Even if the approval of the 19b-4 document alone does not guarantee the final approval of the ETF, in such a crazy market, any positive factors can be regarded as a huge victory. Perhaps, as Kong Jianping, director of Hong Kong Cyberport, said, "Hong Kong's first approval of the Ethereum ETF is a life-saving straw for Ethereum."
What impact will the Ethereum spot ETF have?
The approval of the Ethereum spot ETF may be unexpected. Unlike the Bitcoin spot ETF, investors began to make plans half a year before the Bitcoin spot ETF was approved, and there was a large influx of funds. However, the approval of Ethereum spot ETH is still a milestone event for the crypto industry, and its impact has also laid a positive foundation for the future development of the crypto industry.
Is there any hope for altcoins?
The approval of the spot ETF will have the most direct impact on the price. Bitcoin has risen by 75% since the approval of the spot ETF, and the impact of the approval of the Ethereum spot ETF on the price of ETH is obvious. However, the news of the approval of the Ethereum ETF did not immediately shake the altcoin sector, and it even fell slightly compared to the previous few days.
“If approved, we expect the spot Ethereum ETF to drive inflows of 2.39-9.15 million ETH in the first 12 months following approval,” said Geoff Kendrick, head of FX research and digital asset research at Standard Chartered Bank. “In U.S. dollar terms, this equates to roughly $15 billion to $45 billion in assets,” he added.
Kendrick added, “Given that we now see Bitcoin hitting the $150,000 level by the end of 2024, that would imply an Ethereum price of $8,000.”
In addition to affecting the price of ETH itself, the Ethereum spot ETF will also have a positive impact on the altcoin market. Because the vast majority of altcoins in DEX use ETH as a trading pair, the rise of ETH will lead to a passive rise in altcoins.
In addition, some market opinions believe that with the approval of the Ethereum spot ETF, it will have strong reference significance for more cryptocurrencies to apply for ETFs in the future.
Crypto regulatory policies may change
Another important impact of the approval of the Ethereum spot ETF is the change in the attitude of US regulators towards crypto policy.
As the U.S. election approaches, the inclinations of the Democratic and Republican parties toward the crypto industry are worth paying attention to.
Previously, former U.S. House Speaker Nancy Pelosi was considering supporting a Republican-backed crypto bill FIT21 when the House voted this week. In addition, there is also a cryptocurrency accounting standards bill SAB121 that will be resolved in the near future.
After the Ethereum spot ETF was approved, the mainstream market view was that this had a positive impact on the regulatory environment for cryptocurrencies.
Previously, Alex Thorn, head of research at Galaxy Digital, said that the SEC's regulatory attitude towards Ethereum will try to find a balance between the following two: "ETH" itself is not a security, while "pledged ETH" (or more far-fetchedly, "pledged ETH as a service") is a security.
This is very similar to the demands in the FIT21 Act, which is to clarify which digital assets are regulated by the Commodity Futures Trading Commission (CFTC) and which digital assets are regulated by the Securities and Exchange Commission (SEC). This is important because there are key differences between the definitions of "commodities" and "securities", which will affect how they are regulated.
In short, as a crypto asset class with smart contracts, ETH will definitely have a profound impact on the crypto industry if the spot ETF is passed.
