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News/Fidelity's Ethereum ETF Quest: SEC Approval Delayed to March 2024

Fidelity's Ethereum ETF Quest: SEC Approval Delayed to March 2024

Van Thanh Le

Jan 19 2024

6 months ago4 minutes read
Disappointed chibi robot amidst a surreal clockwork forest, surrounded by swirling crypto charts, symbolizing the delay in Ethereum ETF approval

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Ethereum ETF Limbo: Fidelity's Bid on Hold, But Crypto Market Pushes On

Fidelity's bid to open the door to a spot Ethereum ETF hit a speed bump, with the SEC pushing its decision to March 5, 2024, keeping the crypto community on tenterhooks.

Fidelity's bold step, marked by the submission of the Fidelity Ethereum Fund application last November, challenges the SEC's previous stance. The application, inspired by a judicial query into the SEC's acceptance of futures-based crypto ETFs over their spot counterparts, marks a significant moment in the crypto narrative.

Analysts, like Bloomberg Intelligence's James Seyffart, had predicted this delay, eyeing late May as a crucial period for decision-making. Fidelity's venture into spot Ethereum ETFs, following the introduction of ether futures ETFs, signals a potential shift towards the mainstream embrace of Ethereum, paralleling Bitcoin's journey.

This pause by the SEC is more than a mere delay; it's an opportunity for thorough contemplation of the proposed rule change and its implications. The recent green light for 11 spot bitcoin ETFs has stirred the pot, fueling speculation about the possible nod for a spot Ethereum ETF.

The race for this pioneering spot Ethereum ETF is not a solo endeavor. Giants like Fidelity and BlackRock are at the forefront, indicating a surge in interest from major financial players. The industry's eyes are fixed on the SEC's handling of Ethereum, especially considering its approach to Bitcoin, which it does not classify as a security.

Animated cryptocurrency mascots racing towards ETF approval, with Ethereum in the lead.webp

In a parallel development, Direxion's application for five leveraged Bitcoin ETFs joins the likes of ProShares and REX Shares, signaling a growing appetite for leveraged cryptocurrency investment options. This trend reflects the dynamic shifts in the crypto market, a sentiment echoed by Bloomberg ETF analyst Eric Balchunas in his remarks on the unusual surge of leveraged Bitcoin ETFs.

The debate over the SEC's potential approval of spot Ether ETFs is split. While some analysts remain optimistic, others exercise caution, mindful of the SEC's historically cautious stance on crypto. Stuart Barton of Volatility Shares points out the SEC's approval of futures-based ETFs, hinting at a possible non-security classification for ether, akin to Bitcoin's commodity status. However, the SEC's final stance on Ethereum's classification remains a pivotal factor in this unfolding saga.

JPMorgan on Ether ETF: May or May Not Be the Month 

The air crackles with anticipation as Ethereum, the world's second-largest cryptocurrency, eyes a potential spot ETF in the U.S. But while the recent Bitcoin ETF approval ignited a celebratory spark, JPMorgan throws a damp blanket on the party, casting doubt on a May timeline with a cautious 50% chance estimate.

Ether, riding on the coattails of Bitcoin ETF narratives, emerges as a strong contender for the next spot ETF approval in the U.S. market. Indications of this growing confidence are evident in the Grayscale Ethereum Trust (ETHE), which has seen its discount to net asset value narrow to around 12% in recent months, signaling a bullish sentiment among investors.

However, the SEC's silence on Ether in its recent legal pursuits against crypto exchanges for securities law violations has sparked a debate. Some market watchers are hopeful that the regulator might soon categorize Ether as a commodity, a vital step towards ETF approval. Yet, JPMorgan's experts, including Nikolaos Panigirtzoglou, remain cautious, doubting this classification will occur as swiftly as May.

Impressionistic cityscape with Ethereum-themed skyscraper, symbolizing diverse interest in the Ethereum ETF.webp

Ether's price trajectory has been on an upward swing, partly fueled by the successful approval of a Bitcoin spot ETF. Investors are abuzz with anticipation, hoping for a parallel outcome for Ether. Such an approval would be a landmark event, offering U.S. professional investors a novel avenue to engage with Ethereum's token without the need for direct ownership.

The transition of Ethereum's consensus mechanism from proof-of-work to proof-of-stake in 2022 adds another layer to this complex equation. This shift, while innovative, raises questions about Ethereum's decentralization and aligns Ether more closely with other altcoins, which the SEC has previously labeled as securities. This resemblance could further complicate Ether's path to ETF approval.

Adding to the intrigue, the SEC's ongoing legal battles with exchanges that offer staking services for proof-of-stake blockchains, including Ethereum, introduce additional hurdles. The resolution of these lawsuits could be a decisive factor in the fate of a spot Ether ETF, leaving the crypto community watching and waiting with bated breath.

Ether Eyes a 2024 Comeback: DeFi Throne, Scalability Tweaks, and ETF Hopes Fuel Optimism

2024 could be a pivotal year for Ether, Ethereum's native cryptocurrency, as it stands at the forefront of the DeFi and NFT realms. Despite trailing behind Bitcoin in 2023, Ether is poised for a potential surge. Experts are eyeing a reevaluation, especially with Ethereum's unrivaled status in smart contract technology and the buzz around Ether-based spot ETFs in the U.S.

Coinbase, a major player in the crypto space, is betting on a breakout year for Ether. This optimism stems from its recent value spikes and the anticipated influence of Ether-based spot ETFs. These ETFs, allowing direct investment in cryptocurrencies, are gaining traction over their futures-based counterparts. The success of Bitcoin spot ETFs in the U.S., which amassed over $10 billion in volume, sets a promising stage for Ether's entry into this arena.

Futuristic stock exchange with holographic traders and Ethereum ETF data.webp

Ethereum's upcoming Dencun upgrade is another game-changer. It aims to boost scalability through "data blobs", potentially easing network congestion and slashing fees. The Ethereum Improvement Proposal (EIP) 4844, integral to this upgrade, is expected to cut network fees by over 90%. This technical leap could further cement Ethereum's dominance, already evident as the top 10 ERC-20 tokens hold a market value 13 times greater than the entire BRC-20 token universe.

Investors in Ether have additional perks. Since the Merge in September 2022, staking rewards have offered an average annualized return of around 3.84%. Moreover, Ethereum's unique approach to burning a portion of transaction fees in ETH adds a deflationary aspect, potentially enhancing its value. Despite a 25% dip last year, the ether-bitcoin ratio has improved by 10% this year, hinting at a reversal in Ether's market standing. As these developments unfold, 2024 could mark a significant shift in the crypto landscape, with Ether leading the charge.

Conclusion

Ethereum's future shines bright in 2024, riding waves of potential ETF approval, DeFi dominance, and scalability strides. While hurdles remain, Ether's unique strengths and market momentum position it for a triumphant comeback, potentially dethroning Bitcoin and reshaping the crypto landscape.

FAQs

1. What's holding back Ethereum's spot ETF approval?

The SEC hasn't officially classified Ether as a commodity or security, leaving the path to an ETF unclear. Ongoing legal battles with staking services further muddy the waters.

2. Why is 2024 crucial for Ether?

Fidelity's spot ETF application and growing market confidence could lead to approval, granting investors easier access to Ethereum. Dencun upgrade promises scalability, and DeFi innovation keeps Ethereum on the cutting edge.

3. How could Ethereum overtake Bitcoin?

Ether's dominance in smart contracts, coupled with rising value and anticipated ETF success, could attract investors seeking exposure beyond Bitcoin. Its deflationary features and staking rewards add further allure.

4. What are the potential roadblocks for Ether?

The SEC's stance on Ether and its ongoing lawsuits remain major uncertainties. Additionally, Ethereum's proof-of-stake shift raises decentralization concerns, potentially hindering its path to ETF approval.

This article has been refined and enhanced by ChatGPT.

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