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News/SEC Stalls on Ethereum ETFs: Will May Bring the Green Light?

SEC Stalls on Ethereum ETFs: Will May Bring the Green Light?

Van Thanh Le

Mar 6 2024

2 months ago4 minutes read
A cubic robot at a crossroads

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SEC Delays Decision on BlackRock and Fidelity's Ethereum ETF Applications

The US Securities and Exchange Commission (SEC) has once again postponed its verdict on proposals for spot Ethereum ETFs from investment giants BlackRock and Fidelity, according to its separate March 4 filings. This follows a similar delay in January, after the SEC greenlit several Bitcoin ETFs. The spotlight is now on BlackRock's iShares Ethereum Trust and Fidelity's Ethereum Fund, proposals that could bridge Ethereum with conventional finance, offering investors a regulated path to Ethereum exposure.

The delay was not a curveball for those keeping a close eye on the matter. Experts and analysts had been predicting a decision by May, with Bloomberg's ETF sage, James Seyffart, circling May 23 as a pivotal date. This is especially significant considering it aligns with the deadline for VanEck's own Ethereum ETF bid. 

Amidst this suspense, the SEC has opened the floor for public commentary, probing into the "nature of the underlying assets" of the iShares Ethereum Trust, among other aspects. Feedback on both proposals is expected within 21 days, with counterarguments to follow in the subsequent 35 days.

A focal point of the SEC's scrutiny is Ethereum's transition to a proof of stake mechanism, which stirs concerns about potential manipulation risks and control concentration. The filings by BlackRock and Fidelity last November were part of a wave that saw firms like Franklin Templeton and Ark 21Shares throwing their hats into the ring, all awaiting the SEC's nod.

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SEC Chair Gensler was quick to clarify that the delays are part of a routine, impartial review process, dispelling any notions of underlying motives. It's worth noting that an ETF, or exchange-traded fund, differs from mutual funds in its trading dynamics, mirroring individual stocks' trade throughout the day.

Despite the SEC's cautionary stance, Ethereum's market has reacted with notable optimism. Ether has seen a robust 56.7% price jump in the past month alone, possibly fueled by the anticipation of an ETF approval. However, the road to matching the success of its Bitcoin counterparts, like BlackRock's $10 billion iShares Bitcoin ETF, remains uncertain for the prospective Ethereum ETFs, though the impact of an approval is expected to be substantial.

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Ethereum ETF: A Potential Damp Squib?

The wait for an Ethereum ETF in the US continues, with analysts divided on the timing and impact of its arrival. The Securities and Exchange Commission (SEC) is yet to make a final decision on BlackRock's proposal, leaving market observers guessing. 

The intricate dance of policy making in the United States is poised to play a critical role in shaping the future of crypto-based ETFs, presenting a puzzle that market experts are keenly trying to solve.

Bloomberg analysts, Eric Balchunas and James Seyffart, are gearing up to unveil their predictions on the fate of an Ethereum ETF, suggesting a subdued excitement compared to the fanfare Bitcoin ETFs received. Despite Ethereum's substantial presence in the crypto realm, Balchunas hints at a more modest impact, akin to a promising opening act following a blockbuster headliner. This comparison draws a vivid picture of the anticipated market dynamics, positioning Ethereum ETFs in the shadow of their Bitcoin counterparts, which have captivated investors with over $7 billion in net flows since their debut.

The legal and market landscapes preceding the Bitcoin ETF launches were marked by intense debates and regulatory hurdles, culminating in a landmark victory for Grayscale against the SEC. This triumph paved the way for giants like BlackRock and Fidelity to venture into Ethereum spot ETFs, despite the contrasting market enthusiasm witnessed in the aftermath of Ethereum futures ETFs. These offerings saw a lukewarm reception, a stark contrast to the fervor surrounding Bitcoin futures ETFs, underscoring a marked preference among investors for Bitcoin's allure.

Adding layers to this narrative, a Bitwise survey sheds light on the investment community's tilt towards Bitcoin, with a whopping 71% of advisors favoring it over Ethereum. This sentiment underscores a broader skepticism or perhaps a nuanced understanding of Ethereum's potential vis-à-vis Bitcoin. As the crypto stage is set for Ethereum ETFs, the question remains whether they will emerge from Bitcoin's shadow or carve out their own legacy, amidst a backdrop of regulatory suspense and market predictions hinting at a modest debut.

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Conclusion

The approval of Ethereum ETFs by the SEC remains uncertain, despite proposals from major investment firms. While the market awaits a decision, analysts predict a muted impact compared to Bitcoin ETFs, due to investor preference for Bitcoin and Ethereum's ongoing shift to a proof-of-stake mechanism.

FAQs

1. What is the difference between an Ethereum ETF and a Bitcoin ETF?

An Ethereum ETF would track the price of Ethereum, while a Bitcoin ETF tracks Bitcoin's price. Both offer regulated exposure to these cryptocurrencies, but Bitcoin ETFs have seen more significant investor interest.

2. Why is the SEC delaying its decision on Ethereum ETFs?

The SEC is concerned about potential manipulation risks and control concentration associated with Ethereum's switch to a proof-of-stake mechanism. This scrutiny is part of a standard review process, according to the SEC Chair.

3. How will the approval of an Ethereum ETF impact the market?

Analysts expect a less enthusiastic response compared to Bitcoin ETFs. This could be due to investor preference for Bitcoin and uncertainty surrounding Ethereum's proof-of-stake transition.

4. What are some of the challenges facing Ethereum ETFs?

Challenges include regulatory hurdles from the SEC, a lukewarm reception compared to Bitcoin futures ETFs, and investor preference for Bitcoin over Ethereum.

This article has been refined and enhanced by ChatGPT. 

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