Ether & Altcoin Prices Surge as SEC Halts Investigation

Regulators have temporarily stepped back from Ether, providing a potential growth window for the asset. On June 19, 2024, the United States Securities and Exchange Commission (SEC) concluded its probe into whether Ether (ETH) should be classified as a security. Laura Brookover, a lawyer from Consensys, indicated that the crypto market will no longer face SEC challenges declaring ETH as a security. Carol Goforth, a law professor at the University of Arkansas with expertise in business associations and securities regulation, cautioned that this decision merely pauses the investigation and is not a definitive conclusion.

Consensys is optimistic, believing that the SEC’s withdrawal alleviates a major burden threatening Ethereum’s network. This decisive retreat has calmed negative regulatory concerns around ETH’s status as a security, but the focus now shifts to how this clarity will impact ETH’s price. Many wonder if other cryptocurrencies sharing attributes with Ether might also benefit from this regulatory reprieve.

Analysts are predicting a surge in Ether’s price due to this regulatory development. Since the SEC dropped its investigation, the price of Ether has largely been stable, maintaining a horizontal trajectory similar to the market reaction following the approval of a spot Ether Exchange-Traded Fund (ETF) on May 23. Despite a current 2% drop, traders are speculating whether this clear path will cause ETH to rise and potentially bring the altcoin market along with it. Conor O’Neill from Blockcircle points out that the major regulatory hurdle for Ethereum has been removed, setting a precedent for global regulators. He believes that this reduction in risk and uncertainty paves the way for significant price increases.

Several factors could further influence ETH’s price. The anticipated launch of spot Ether ETFs scheduled for July 2 is likely to impact ETH’s market value. Similar to the effect observed with Bitcoin ETFs launched in January, traditional investors are expected to funnel capital into Ether ETFs, driving up demand and prices. O’Neill asserts that the ETH ETF will have a long-lasting positive influence on Ethereum’s value, though a short-term dip, akin to the post-Bitcoin ETF approval trend, should be expected.

Despite the positive outlook, there are constraints to consider. The SEC’s approval of ETH ETFs came with specific conditions, particularly prohibiting staking in these funds. Goforth explained that staking is considered an investment contract by the SEC, which removes potential for additional returns to investors. O’Neill suggests that continued strict regulation, especially around staking, could adversely affect ETH’s long-term viability as an institutional asset, potentially dampening its price.

Questions also linger regarding the impact of Grayscale outflows on Ether’s price once ETFs launch. Grayscale’s Ethereum Trust, valued at over $10 billion, might see significant withdrawals similar to those experienced by its Bitcoin Trust. Grayscale has reduced its management fees for Ether to match other ETF providers, indicating efforts to avoid a repeat scenario. O’Neill believes that the volume of ETH held by Grayscale will likely rise considerably post-ETF launch.

O’Neill foresees a price trajectory for ETH similar to Bitcoin’s, with an initial dip followed by substantial growth. The main difference with Ether’s ETF approval lies in the unexpected nature of the decision, suggesting that market prices might currently be lower than they could be. This surprise element could lead to Ether outperforming Bitcoin, presenting a bullish outlook for ETH.

The regulatory clarity around Ether eliminates a significant obstacle, potentially paving the way for an ETH price surge. This raises the question of whether other altcoins will follow suit. Altcoin prices generally see an uptick when major cryptocurrencies like Bitcoin and Ether rise. Given the SEC’s halted investigation, other altcoins previously labeled as securities might also see benefits.

O’Neill suggests that altcoins involved in decentralized finance (DeFi) or layer-2 solutions, such as Aave, Chainlink, Arbitrum, Optimism, or Base, could profit from lessened regulatory pressure on Ethereum. He warns that many of these altcoins offer staking services and are not completely free from SEC scrutiny. The regulatory landscape could shift significantly with the upcoming U.S. presidential election, especially if pro-crypto candidates gain power, potentially altering the SEC’s stance on staking.

The surprise approval of a spot Ether ETF and the SEC’s cessation of its investigation could indicate an evolving regulatory environment. These developments mark a critical juncture for Ethereum and the wider cryptocurrency market, suggesting a period of potential growth and transformation ahead.