This article was originally written by ChainDD by Dorji
In the early morning of July 23rd, Beijing time, according to official information from the U.S. SEC, it has officially approved the S-1 applications of 9 ETF issuers. The Ethereum spot ETF has been officially approved for listing and trading. It is expected that initial trading will officially begin tomorrow (9:30 a.m. U.S. time on Tuesday, tomorrow night Beijing time).
After years of fighting and negotiating with regulators, Ethereum has finally entered the U.S. capital trading market after the Bitcoin ecosystem.
The bull market has been stirred up by the Bitcoin spot ETF, and the US election has reached a historic node, the most important moment for Crypto. Ethereum, which has entered a new ecological era, will also usher in its own highlight moment. At the highly anticipated spot ETF listing node, when institutions and retail investors are about to enter the market, what changes and investment opportunities will the Ethereum ecosystem have? This is undoubtedly the focus of public attention.
With the SEC approving the S-1 application of the ETF issuer early this morning Beijing time, there is no doubt that following the approval of the Bitcoin ETF in January this year, the approval of the ETH spot ETF will be another important milestone in the history of Crypto. It also indicates that the regulation surrounding the crypto industry has officially broken the ice and entered a mature regulatory landscape dominated by market demand and centered on innovation.
9 Ethereum spot ETFs approved, trading to start tomorrow
After obtaining approval from the SEC early this morning, the Chicago Board Options Exchange (Cboe) also announced that five Ethereum spot ETFs, including the Fidelity Ethereum Fund, Franklin Ethereum ETF, Invesco Galaxy Ethereum ETF, VanEck Ethereum ETF and 21Shares Core Ethereum ETF, will be listed on its platform and start trading tomorrow.
BlackRock (BLK.N) also said on the X platform that BlackRock's iShares Spot Ethereum ETF will begin trading on the Nasdaq on July 23, US time.
After the S-1 application was approved, Bloomberg ETF analyst Eric Balchunas wrote on X: "The spot Ethereum ETF has taken effect at the SEC. Form 424(b) is being submitted in succession. This is the last step, which means everything is ready and trading can be started at 9:30 a.m. on Tuesday (9:30 p.m. Beijing time tonight). Game on."
According to previous announcements from Nasdaq, NYSE and CME, all ETH spot ETFs will be available for trading on these three platforms. However, as of press time, the remaining Ethereum spot ETFs and exchanges have not yet issued other official announcements, which are expected to be released on the eve of listing.
The issuer of the Ethereum spot ETF issued this time is the same as that of the Bitcoin spot ETF, but the two institutions WisdomTree and Valkyrie are missing from the issuance list.
After submitting the S-1/A and other applications last week, issuers have announced the fees of 9 spot Ethereum ETFs. The specific data are as follows:
BlackRock Spot Ethereum ETF has a fee of 0.25% (0.12% for the first $2.5 billion or the first 12 months), the ticker is ETHA;
The Fidelity Spot Ethereum ETF has a fee of 0.25% (no management fee in 2024), and the ticker is FETH;
The Bitwise Spot Ethereum ETF has a fee of 0.20% (0% for the first $500 million or first 6 months), and the ticker is ETHW;
21Shares Spot Ethereum ETF has a fee of 0.21% (0% for the first $500 million or first 12 months), and the ticker is GETH;
VanEck Spot Ethereum ETF has a fee of 0.20% (0% for the first $1.5 billion or first 12 months), the ticker is ETHV;
The Invesco Galaxy Spot Ethereum ETF has a fee of 0.25% and is priced under the ticker QETH.
Franklin Spot Ethereum ETF has a fee of 0.19% (0% before January 31, 2025 or before $10 billion), and the ticker is EZET;
Grayscale’s spot Ethereum ETF has a fee of 2.50% and its ticker is ETHE;
The Grayscale Spot Ethereum Mini ETF has a fee of 0.25% (0.12% for the first $2 billion or first 12 months) and is priced at ETH.
Except for Grayscale's conversion of the existing Grayscale Ethereum Trust ETHE into an ETF, which still maintains the previous fee rate of 2.5%, the management fees of the other eight spot ETFs are between 0.15% and 0.25%. Among the issuers, five will waive management fees in the next six months to a year, and three will use ultra-low management fees to attract investors.
It is highly likely that Ethereum ETF will not be able to replicate the glory of Bitcoin ETF
Can the Ethereum spot ETF replicate the glory of the Bitcoin spot ETF? Although the crypto market very much hopes for such an outcome, in reality, it is not likely.
A new survey by State Street Global Advisors shows that in April this year, 45% of US individual investors used ETFs, among which the Bitcoin spot ETF has accumulated more than $54 billion in assets under management since its launch in January this year. The total holdings of US spot Bitcoin ETFs have exceeded 900,000 Bitcoins, reaching 908,000 Bitcoins at the time of writing, accounting for 4.6% of the current Bitcoin supply, and the total value of on-chain holdings reached approximately $61.2 billion. In addition, data shows that the capital inflow of US spot Bitcoin ETFs reached approximately $1.08 billion last week, and the total capital inflow since its launch reached $17.3 billion, accounting for 89.5% of the global market.
Ethereum’s beacon chain staking alone accounts for 27.57% of Ethereum’s supply, which is completely unparalleled in the Bitcoin ecosystem. In driving DeFi, L2 bridges, and various contract issues, there is more than one-third of Ethereum’s supply, and Ethereum’s generation mechanism is different from Bitcoin’s POW, so the value they represent in the traditional trading market is incomparable.
The reason why Americans love Bitcoin so much is, on the one hand, because Bitcoin, known as digital gold, has the highest financial value in the Crypto market, and on the other hand, Wall Street giants including JPMorgan Chase, Goldman Sachs, Citigroup and others have begun to provide Bitcoin investment services to their clients, directly purchasing Bitcoin as part of their asset allocation. Bitcoin is relatively easy to manipulate. JPMorgan Chase, Bank of America and others have begun to provide banking services to cryptocurrency companies, while payment giants such as PayPal, Visa and Mastercard allow users to buy, sell or use Bitcoin on their platforms.
An interesting point is that, contrary to the consensus in Crypto, Solana is a more popular currency in the U.S. financial market. If you look closely at this round of bull market, the mainstream token with the most rapid growth is Solana.
From $55 in November last year, to $100 in January this year, and now approaching the $180 mark, SOL has increased by as much as 619% in the past year. Even after the Bitcoin ETF was listed, when we compare it with mainstream currencies, Bitcoin has increased by 42.55% in the past six months, Ethereum has increased by 52.17%, and SOL has increased by 78.79%.
DefiLlama tracking data shows that the total locked value (TVL) of tokens on Solana has increased by more than 25% in a month, breaking the $5.28 billion mark and reaching the level of April 2022. The network has earned at least $1.5 million a day since June, and the daily on-chain transaction volume has netted more than $2 billion in the past week.
There are many reasons why Ethereum’s bull market performance in the past six months is not as good as Solana. The most core reason is that there are too many Ethereum developers, especially after experiencing DeFi Summer. There are too many vested interests in its ecological pledge and DeFi, resulting in serious selling pressure. This problem also exists in the Bitcoin ecosystem. After Bitcoin reached a new high of $70,000, the continuous selling pressure has prevented it from maintaining its high point. It is also the reason for the subsequent lack of market confidence and the decline. This problem has plagued the Ethereum ecosystem to this day.
What’s encouraging about Solana is that all of its growth this year basically comes from new protocols such as MeMe, DeFi, and GameFi. In the past month, seven of Solana’s top ten TVL growers were just launched this year. The most important thing is that their tokens have either not been released yet or have just started to be raised, so there is no selling pressure problem.
After all, for Crypto, a sustainable token design should include fair distribution, reasonable supply, and clear purpose. Even though Vitalik has racked his brains for this issue, past selling pressure caused by historical issues has seriously constrained the growth of Ethereum in this bull market.
According to 21Shares, its spot Solana ETF has submitted the S-1 filing, and its competitor VanEck submitted the filing before that. 21Shares became the second company to apply to launch the Solana ETF in the United States.
Like VanEck, 21Shares also believes that Solana's native token should be considered a commodity. However, the U.S. Securities and Exchange Commission (SEC) Enforcement Division has stated that SOL is a security, which could be a significant obstacle to the launch of these funds. 21Shares SOL will reportedly have its funds custodied by Coinbase Custody.
If the next US government is more friendly to Crypto policies in the future, then the SOL spot ETF will definitely not be too far away, which is not good news for the Ethereum ETF. After all, no matter how big the US market is, its scale is limited. A large piece of the cake has been eaten by Bitcoin, and the rest will have to be divided up by SOL.
Subsequent Outlook: Ethereum spot ETF has great potential, but market sentiment is not high
There are different opinions in the market about how much net inflows the Ethereum spot ETF can obtain. Among traditional financial institutions in the United States, Standard Chartered Bank has given the highest valuation, which could be US$2 billion per month, while JPMorgan Chase is more pessimistic and has given a lower valuation of US$500 million per month.
Bitwise and Grayscale executives, as issuers, also made predictions on the X platform. Bitwise's CTO Matt Hougan predicted on the X platform that it would receive $15 billion in net fund flows in the first 18 months of listing. The Grayscale research team expects the demand for the US spot Ethereum ETF to reach 25%-30% of the demand for the spot Bitcoin ETF. A large portion of Ethereum's supply (such as staked ETH) may not be used for ETFs.
Galaxy also set its net inflow forecast target for the first five months at 30%.
Research firm Steno Research also predicts that the Ethereum spot ETF could attract $15 billion to $20 billion in inflows in its first year, which is roughly the same as the inflows that the Bitcoin spot ETF saw in just seven months.
However, unlike the objective forecasts of many institutions, the market's current reaction to the prospect of Ethereum inflows is relatively flat. Data from research firm Kaiko shows that investors lack confidence in the launch of Ethereum spot ETFs. As of press time, the spot price of Ethereum is $3,530.04, with a 24-hour increase of only 1.21%.
Citigroup estimates that ETF inflows can only account for 30%-35% of Bitcoin inflows, or even lower, and is not optimistic about the advantages that ETFs will bring to the Ethereum market price. CoinDesk quoted the report as saying that in the next six months, this figure will reach US$4.7 billion to US$5.4 billion.
Compared with Bitcoin ETF, which has the first-mover advantage and a high status in the hearts of the people, many functions of the Ethereum ecosystem cannot be achieved through ETF, so the demand is not strong.
For example, Ethereum’s unique staking function. A large number of tokens in Ethereum exist in the verifier nodes on the beacon chain. Its significantly high returns are the key to Ethereum’s evergreen status in the market after changing its model. When the ETF application was submitted this year, the pledge function was rejected by the SEC. In the lawsuit against Coinbase and Kraken, the SEC specifically alleged that the pledge was an unregistered security and violated U.S. securities laws.
Therefore, at least in the short term, we will not see the pledge function in ETFs.
And the worst thing we can see from this result is that the approval of the ETF is more about facilitating the market’s financial needs for the ETF, but for the Ethereum ecosystem, apart from its financial value, it does not seem to play a good role in building the ecosystem.
Judging from the approval of the Ethereum spot ETF, at least the SEC believes that POS and pledge mechanisms are not obstacles to Ethereum transactions. (The SEC’s core view has always been to suppress securities products.) At least before the tokens based on the Ethereum ERC-20 protocol applied for an ETF, the SEC believed that the impact on the U.S. trading market was not serious.
Another factor that affects market liquidity is that, in anticipation of the launch of ETFs, the amount of ETH held by exchanges has fallen to a multi-year low. This year, market liquidity has shifted more toward the Bitcoin market, resulting in insufficient inherent liquidity in the Ethereum market this year.
On the other hand, as Grayscale converted ETHE into an ETF fund, the market was impressed by the selling pressure that lasted for more than a month after GBTC was converted into a Bitcoin spot ETF, and everyone has the same concerns about the potential selling pressure after ETHE is listed.
There is another potential problem. The Ethereum spot ETF was approved in May and went online today. There was a long pause in between, and the market sentiment has been digested. Therefore, apart from the influence of real money, there is insufficient emotional driving force. For Ethereum, this consensus value is even more important.
As for whether this emotion can eventually be transmitted to the Ethereum ecosystem after the transaction is started, all the answers will be revealed starting tomorrow.
But regardless, for investors, the spot ETH ETF provides access to differentiated crypto assets with unique return characteristics. The Ethereum ecosystem is both strong, with more than 15 million active addresses per month, and rapidly expanding, with smart contracts deployed growing by 300% in 2023. By increasing the use of Ethereum, spot ETH ETF investors will help increase the utility of Ether and contribute to the development of the overall crypto ecosystem.
(This article was first published on Liandede APP)
