With Bitcoin exchange-traded funds (ETFs) receiving approval earlier this year, billions of dollars in new capital have been invested into the cryptocurrency sector. Such a victory is exciting for crypto traders, but it also presents an interesting question. Will the long-awaited Bitcoin ETF approval lead to an Ethereum ETF approval in 2024?
Under Securities and Exchange Commission (SEC) Chair Gary Gensler, the spot Bitcoin ETF approval means that investors can invest in Bitcoin through their traditional stock exchange without investing in the actual asset. Instead, they’re investing in a fund that holds Bitcoin, such as the Bitwise Bitcoin ETF (BITB), through their brokerage account. That fund then follows the price of Bitcoin.
A spot Ethereum ETF is the same idea, only it’s a fund that tracks the price of Ethereum’s native cryptocurrency, ether.
Ethereum exchange-traded funds are important for Ethereum’s long-term success. Here are a few reasons why:
Note: Investing in spot Ether ETFs does not mitigate the risk and volatility typically associated with cryptocurrencies.
Asset management firm BlackRock filed for approval of its iShares Ethereum ETF last November. It was one of the first to push for and receive the approval of spot Bitcoin ETFs and the first to hit $1 billion in assets.
BlackRock’s support of an Ethereum ETF is vital for gaining traction for the instrument. The management firm is one of the world’s largest, and receiving regulatory approval would surely pave the way for other Ethereum ETFs.
BlackRock’s application is one of many. Investment firms VanEck and ARK Invest were the first to put forth their Ethereum ETF applications, and as of April 3, Bitwise, Grayscale Investments, and Fidelity have also put their applications forward. The SEC will solicit comments on the matter for three weeks, though the commission’s decision will likely take longer.
The commission’s current deadline is May 23.
Gensler has said the spot Bitcoin ETF approval is not an endorsement of crypto. The SEC Chair is frequently critical of cryptocurrencies and has done little to progress the conversation regarding Ethereum ETFs – a stark contrast to the Bitcoin ETF approval process. This lack of discussion could be problematic.
Grayscale’s Chief Legal Officer, Craig Salm, sees hope in the SEC’s muted response. Salm claims that the conversation already happened with Bitcoin ETFs, and we shouldn’t retread that ground with an ETH ETF.
Some believe the SEC is waiting for an official classification of Ethereum. There’s still debate on whether Ether is a commodity or a security, and the SEC is currently investigating the Ethereum Foundation to help make this decision.
Whether Ethereum has an ETF approved in 2024 is still up for debate. Yet, even if the SEC decides against Ethereum ETFs this go-around, investment firms are bound to keep their applications coming. Persistence worked for Bitcoin. There’s no reason to think it won’t work for Ethereum.
An Ethereum futures ETF is a fund that holds futures contracts rather than ether itself. These contracts are agreements to buy or sell an asset at a predetermined time and price point, speculating on an asset’s future.
While futures ETFs enable some form of Ethereum investment without direct exposure to the asset, they don’t follow Ethereum’s price movements like a spot ETF would. SEC-approved Ethereum futures ETFs are already available on various stock exchanges.
Predicting Ethereum’s price movements is impossible, as the crypto market is generally unpredictable. However, the spot Bitcoin ETF approval led to massive price jumps as investment firms spent hundreds of millions establishing their funds. One may expect the same behavior for Ethereum, should ether ETF applications receive approval.
