Key Points
- The U.S. SEC has given approval to eight Ethereum (ETH) spot ETF applications.
- This decision is expected to significantly impact the broader cryptocurrency market.
The U.S. Securities and Exchange Commission (SEC) has given approval to eight applications for spot Ethereum (ETH) exchange-traded funds (ETFs).
ETF Applications Approval
The applications were submitted by BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, and Franklin Templeton. Prior to this, it seemed the SEC was unlikely to approve these ETFs due to a lack of communication with the issuers.
However, this changed when the SEC began engaging with issuers and requested the submission of 19b-4 forms. Nonetheless, this approval doesn’t mean that the spot ETH ETF will instantly become tradable.
James Seyffart, a Bloomberg ETF expert, noted that ETF issuers must get their S-1 forms approved, a process which typically takes months.
Impacts of the Approval
The approval of the ETH ETF is expected to result in significant capital inflows, similar to the Bitcoin (BTC) spot ETF. According to a Citi analysis, net inflows into Bitcoin (BTC) spot ETFs totaled $13 billion between 4th January and 20th May. This led to a surge in BTC’s price, pushing it to a new all-time high.
If similar market-cap-adjusted flows are applied to ETH, inflows could range between $3.8 billion and $4.5 billion, potentially driving ETH prices up by 23%-28%. Some experts believe that the spot ETF approval will push ETH’s price past its current all-time high.
There is a debate about whether the ETH spot ETF approval would result in an increase in staking rewards on the Ethereum network. Matthew Sigel, the head of Digital Assets at VanEck, believes yields across staking protocols will increase as ETH moves from these protocols into these ETFs.
However, this could have security implications for the Ethereum ecosystem. If ETH stakers continue to withdraw their previously staked coins and move them to the newly approved ETFs, it could weaken the security of the Ethereum network.
Some argue that this would not be an issue, as the ETH ETF may not deliver enough returns to investors to entice stakers to move their coins from staking protocols.
The approval of the ETH spot ETF indicates a positive shift in the SEC’s stance on the crypto sector. After the approval news, ETH’s price climbed to a high of $3993 before witnessing a 5% correction.
This price drop led to significant liquidations of long ETH positions, totaling $92 million, according to Coinglass data.
