Upcoming Ethereum ETF Surprise

The long-awaited approval of a Bitcoin spot ETF has finally arrived, surprising many in the industry. Now, attention has turned to the approval of an Ether spot ETF as the next target. However, the approval of an ETH spot ETF is not only certain but imminent. Unlike the Securities and Exchange Commission’s (SEC) past denials of BTC ETF applications, the objections to an ETH ETF are no longer valid. Commissioner Hester Peirce criticized the SEC’s conduct and stated that the denials of these applications were based on prejudice against Bitcoin, which was only resolved through Greyscale’s lawsuit. This has led to a lack of trust in the SEC and a circus-like atmosphere around crypto products.

Currently, there are seven ETH spot ETF applications awaiting approval by the SEC. VanEck is the first in line with a deadline in May 2024. BlackRock’s application is due in August, but the SEC has already initiated proceedings on VanEck’s applications, which could affect other pending applications. This has led the market to believe that approval is likely in May. Furthermore, the path has been cleared for various types of crypto-backed or linked ETPs, including spot products and complex structured products.

There is a potential obstacle to an ETH spot approval, which is liquidity. Just as the size of the Bitcoin market was a concern, Ethereum’s move to proof-of-stake has limited the supply of ETH. Additionally, while Bitcoin is primarily used as a store of value, ETH is a working currency used for transactions on the Ethereum blockchain. However, this is seen as a long shot and similar liquidity concerns are not applied to equities. Solutions will continue to be found for liquidity issues in the market.

The question of whether ETH is a security is irrelevant as it becomes a security once it becomes an ETF. Commodity ETFs already exist, so the approval process for a BTC ETF took a long time due to politics, and now there is clarity on the matter. With the approval of a BTC spot ETF, the cryptocurrency industry is now firmly established in traditional finance. The focus now shifts to the institutional adoption of cryptocurrencies as more ETFs are approved.