The U.S. regulators have officially approved spot exchange-traded funds that hold Ethereum’s ether (ETH), allowing Americans to access the second-largest cryptocurrency through these easily tradable vehicles. This decision marks the end of a lengthy process to get ether ETFs approved by the Securities and Exchange Commission, following the approval of bitcoin (BTC) ETFs earlier in the year. With ether packaged in an ETF wrapper, traditional investors may find them more appealing as they can be bought and sold through regular brokerage accounts. Since their introduction in January, bitcoin ETFs have seen significant investments amounting to billions of dollars.
The approval of Ethereum ETFs was not guaranteed until recently. In late May, SEC officials suddenly began interacting with potential ETF issuers after a prolonged period of silence. Subsequently, on May 23, a crucial filing was approved, paving the way for full approval with the latest decision. This development has been described as the beginning of the “ETF era of crypto” by Matt Hougan, the chief investment officer at Bitwise. He stated that investors can now access over 70% of the liquid crypto asset market through low-cost ETPs.
VanEck’s head of digital assets, Kyle DaCruz, emphasized the importance of providing investors with accessible and familiar vehicles for exposure to Ethereum. Referring to Bitcoin as digital gold, DaCruz likened Ethereum to an open-source App Store that serves as a gateway to thousands of blockchain applications. The impact of Ethereum ETF approval on the cryptocurrency’s price is a topic of interest. Following the approval and subsequent trading of spot bitcoin ETFs earlier in the year, Bitcoin experienced a surge in price, reaching new all-time highs after a rapid 58% increase in just two months.
While some analysts anticipate that an Ethereum ETF could potentially drive the price of ether up to $6,500, they believe that the inflows into these funds may not be as substantial as those seen with bitcoin-focused ETFs. Research firm Steno Research estimates that newly launched ETFs could attract $15 billion to $20 billion in inflows during the first year, a figure comparable to what spot bitcoin ETFs accumulated in seven months. Unlike Bitcoin, Ethereum lacks the advantage of being a first mover and a compelling narrative like Bitcoin’s “digital gold” concept, according to the firm’s report.
In conclusion, the approval of Ethereum ETFs signifies a significant milestone in the cryptocurrency market, providing investors with additional opportunities to access and invest in the digital asset. As the popularity and acceptance of cryptocurrencies continue to grow, these ETFs could play a crucial role in expanding the reach of Ethereum and other digital assets to a broader investor base.