Ethereum ETFs Got Final Approval And Launched this Week
Ethereum ETFs launched Tuesday, July 23, ending a two-month-long wait. Up to 8 fund managers are expected to submit their final applications by the end of this week and, following SEC acceptance on Monday, the new funds could be available to investors on Tuesday.
The news saw Ether prices rise to nearly $3,500, although it did drop back again in the hours following. Funds have had to remove staking from the funds to get them passed and this, along with Ethereum’s lower market capitalization compared to Bitcoin, means that experts expect it to attract less investment than BTC ETFs.
After Bitcoin, Ethereum is the second largest cryptocurrency by market capitalization. Ether, the native crypto coin, is used by developers who want to use the Ethereum network to develop dApps, including meme coins and NFTs.
It is also being used increasingly as an alternative payment method to fiat currencies to buy goods and pay for services, and according to the experts with Crypto Casino Limited, it, along with other cryptocurrencies, is popular in crypto casinos for its anonymity and fast transaction times.
Bitcoin ETF History
The first Bitcoin ETF application was submitted in 2013 by Gemini co-founders Cameron and Tyler Winklevoss. The Winklevoss twins hoped that the introduction of a spot ETF would bring new investment and open up the market to new investors. It is theoretically a more secure and simpler way to invest in the emerging market, and the complexity of Bitcoin investment is a major barrier for a lot of potential buyers.
ETF Acceptance
Despite multiple applications and filings, the SEC continued to reject applications. However, in August 2023, the U.S. Court of Appeal for the District of Columbia ruled that the SEC had not adequately explained its refusal of spot ETFs. As a result, in January 2024, the SEC finally approved applications for Bitcoin funds. The first applications accepted were for the following funds:
- Franklin Bitcoin ETF
- Bitwise Bitcoin ETF
- Ark 21Shares Bitcoin ETF
- Fidelity Wise Origin Bitcoin ETF
- Wisdom Tree Bitcoin ETF
- Invesco Galaxy Bitcoin ETF
- Valkyrie Bitcoin ETF
- iShares Bitcoin Trust ETF
- VanEck Bitcoin Trust ETF
- Grayscale Bitcoin Trust
Bitcoin Inflows
The day after the applications were accepted, the funds went on sale. It was reported that $6.6 billion was invested in the new financial products on their launch, and by the end of June, just under six months since their launch, there had been a net inflow of $33 billion. Although inflows had reduced, recent reports show net inflows of more than $300 million during some days at the beginning of July, pointing to further investment during Bitcoin’s most recent price dip.
Price Reactions
Despite ETFs being launched in mid-January, it took a month for prices to react positively to the new money. In mid-February, BTC prices rose to $52,000, and by mid-March, they had hit new all-time highs of over $70,000.
Although prices did stumble in June and early July, falling as low as $56,000, they have bounced back and are challenging $65,000 resistance. Many analysts believe Bitcoin’s price will reach new highs and potentially go on to $100,000 by the end of this year.
Ethereum Funds
Bitcoin’s spot ETF acceptance also had a knock-on effect of pushing the SEC to rethink its stance on Ethereum spot ETFs. However, it still came as a shock when, in May, the SEC ruled that Ethereum ETF applications could be submitted.
Despite many early applications, most were rejected, with an early stumbling block being that fund managers included staking in their investment proposals. Staking means setting aside some of the currency to buy contracts, essentially making the investment inaccessible until the fruition of the contract. In the eyes of the SEC, this meant that the funds would be acting as securities and would fall under securities regulatory requirements.
Fund Acceptance
Funds reluctantly removed staking and reapplied. Although it has taken several rounds of applications and resubmissions, it has emerged that three ETFs have received preliminary approval for their products and that the eight funds need only reapply before the end of this week. Assuming all is well with the applications, the SEC will grant approval on Monday afternoon and the first ETH ETFs will go on sale on Tuesday, July 23, 2024.
The eight ETFs that have applied, and are likely to start trading next week, are:
- Grayscale Ethereum Trust
- Bitwise Ethereum ETF
- Blackrocks iShares Ethereum Trust
- VanEck Ethereum Trust
- ARK 21Shares Ethereum ETF
- Invesco Galaxy Ethereum ETF
- Fidelity Ethereum Fund
- Franklin Ethereum ETF
Possible ETH Price Boost
Investors hope that the launch of spot ETFs will boost Ether prices. Although they have some way to go before reaching their previous ATH, the news has already seen some positive movement.
ETH prices dipped below $3,000 on July 5 and July 7, for the first time since May. However, on July 15, they had not only bounced back above $3,000 but had gone on to test $3,500 resistance. Formal acceptance of the funds may well see these prices rise.
Lower Investment Expected
Experts have warned that the ETFs will not see the same level of investment as Bitcoin’s own funds, though. Ethereum’s market capitalization is just over $400 billion, compared to the $1.25 trillion of Bitcoin and Bitcoin enjoyed the boost of being first to market. Ether will also suffer for the exclusion of staking from its products, leading commentators to predict that these latest crypto products will see inflows equivalent to around a third of those experienced by Bitcoin.
Solana Next?
Once Ethereum ETFs launch, experts expect fund managers to turn their attention to Solana funds. Solana was only launched in 2020, but in the four years since its launch, it has gone on to become the fifth largest cryptocurrency, behind Tether and Binance, as well as Bitcoin and Ethereum.
It boasts fast, low-cost transactions and the SOL coin is used for staking on the Solana network. The network has become especially popular with meme coin founders, with some of the largest tokens established on the network including Pepe and Dogwifhat, both of which are enjoying positive movements over the past couple of days.
Although Ripple may lay some claims to being the next likeliest candidate, investors point to the similarities between Solana and Ethereum, as well as its considerable market capitalization, as being the main reasons it will be next in line with the SEC.
What Is An ETF?
An Exchange Traded Fund (ETF) is a financial product that aims to match or exceed the performance of a market, group of commodities, or a single commodity. In the case of Ether ETFs, the fund manager will buy and sell Ether, holding it in a secure wallet.
The ETFs will be tradeable outside crypto exchanges, offering a more secure and less complex means of investing in the world’s second-largest cryptocurrency.
Why Has It Taken So Long For Ether ETFs To Launch?
Typically, when ETFs are given the green light by the SEC, funds go on sale almost immediately. The same was true of Bitcoin ETFs, which went on sale the day after acceptance. However, would-be investors have had to wait since May for ETH ETFs to hit the market as funds submitted applications and the SEC rejected them.
The biggest stumbling block has been the fact that fund managers have wanted to include staking as part of the fund investment scheme, but the SEC has firmly rejected this inclusion because it would effectively make the ETFs securities.
Will ETFs Cause An Increase In ETH Prices?
Positive news about cryptocurrencies can lead to some increase in their price, as well as to the market as a whole. However, Ether's performance, much like that of other cryptocurrencies, is closely tied to the performance of Bitcoin. If Bitcoin goes up and Ether funds get the go-ahead, as expected, Ethereum may outperform BTC prices.
However, as investors have been waiting some time for funds to launch, the news may have already been built into existing prices. And, it took around a month after the launch of Bitcoin funds for BTC prices to increase, so there could be a delay with ETH prices too.
Conclusion
Ether investors have been waiting two months since the SEC’s announcement to get final approval and see the launch of exchange-traded funds tied to Ether’s value. It now looks likely that these financial products will launch as early as next week, with fund managers needing to submit a final application in the coming days.
