The cryptocurrency landscape is filled with anticipation and speculation over one event after another. This is also the case following the recent approval of a Bitcoin ETF, which has sparked discussions about the potential for similar ETF products comprising other crypto assets, and more particularly an ETF for the ‘runner up’, Ethereum. In this article, we will examine the likelihood and implications of a spot ETF for Ethereum, along with the stances of notable figures within the regulatory and banking sphere. Let’s dive in….
TL;DR
- SEC Decision Pending: Ethereum ETF approval hinges on the SEC’s classification, with a key decision due by May 2024.
- Big Players in Line: Firms like BlackRock and Fidelity await the SEC’s verdict on their Ethereum ETF applications.
- Approval Timeline Uncertain: Despite past Bitcoin ETF approvals, the SEC’s cautious stance may delay Ethereum ETFs.
Bitcoin ETF Approval Recap
On January 10, 2024, the Securities and Exchange Commission took a monumental step for cryptocurrencies by approving the first spot Bitcoin exchange-traded funds (ETFs). In a landmark decision, the SEC greenlighted 11 Bitcoin ETF applications.
With the approval of the Bitcoin ETF, all eyes are looking at the likelihood of an Ethereum spot ETF approval; however, is this realistic?
Comparing Apples and Oranges
While Bitcoin is often viewed primarily as a store of value, Ethereum possesses additional distinguishing qualities that set it apart. Bitcoin is frequently compared to digital gold, serving as a collateral currency or means to preserve wealth over time. Ethereum, on the other hand, provides a platform for further innovation through decentralized applications (dApps).
This underscores how comparing Bitcoin and Ethereum directly can oversimplify their differing roles and utilities. As a currency-focused crypto versus one supporting a broader ecosystem, drawing conclusions about their roles in existing and potential ETF products requires a deeper analysis.
Although the underlying utility of Ethereum establishes a strong case for an Ethereum ETF, we cannot say that there is going to be an Ethereum ETF just because a Bitcoin spot ETF has been approved.
Who Has Applied for a Spot Ethereum ETF?
Currently, several asset managers have filed for Ethereum ETFs applications, all familiar names involved in prior Bitcoin ETF applications.
These include Volatility Shares, Bitwise, Grayscale, VanEck, Roundhill, Proshares, BlackRock, Ark Invest, 21shares, and Fidelity, which saw its Ethereum ETF applications rejected by the financial guard dog of the United States, the Securities and Exchange Commission – SEC.
When Ethereum ETF?
The question to this is, we simply don’t know. When exactly the spot Ethereum ETF is going to be approved lies in the hands of one entity only, the SEC.
Although in October 2023, the SEC approved several ETFs that included Ethereum futures. The regulatory body has not yet approved a spot Ethereum ETF.
SEC Delays
The long, drawn-out period leading up to the bitcoin ETF approval is something we will get used to, as the SEC delayed its decision on the Ethereum ETF to allow for a “more comprehensive review of the proposed rule change and to address the issues raised.”
Ethereum as a Security or a Commodity
The delay can be interpreted as an indication of whether the regulator may not consider Ethereum a security. After what feels like a crypto lifetime, we still don’t know the official stance of the SEC on considering Ethereum a security or commodity.
What we know is that SEC chairman Gensler, before joining the SEC, mentioned in a course at MIT that Ethereum is “not a security”.
Why May Will be Important?
The month of May 2024 is a spot marked on the ETF calendar because the SEC is expected to make a decision on a spot Ethereum ETF application from VanEck, more specifically on May 23rd. Other industry giants, as mentioned such as BlackRock, Fidelity, and ARK Invest, are awaiting decisions with later deadlines.
Blackrock Larry Fink’s Perspective on the Ethereum ETF
Larry Fink of BlackRock has a forward-thinking perspective on Ethereum ETFs and the broader potential of tokenization (made possible by, you guessed it, Ethereum).
He acknowledges that technological changes like Bitcoin ETFs are just the beginning of a shift towards a more transparent and efficient system that could help eliminate corruption. However, a definitive stance is not stated, as he as well has to listen to the approval by the SEC.
Investment Banker Weighs in
According to the investment bank TD Cowen, the SEC is not expected to approve spot Ethereum ETFs in the near future as they believe the SEC wants to observe the performance of the recently approved Bitcoin ETPs before moving forward with Ethereum.
The investment bank suggests that while the wait for approval of spot Ethereum ETFs may not be as lengthy as the 26-month period that preceded the approval of spot Bitcoin ETFs, it could be long enough after the upcoming presidential election that is in November 2024.
Conclusion
Leading asset managers like Fidelity, BlackRock and Ark Invest await the SEC’s verdicts on their Ethereum ETF applications, with the VanEck decision expected in May 2024 marking a key benchmark.
However, while some analysts are optimistic, others remain cautious, with TD Cowen analysts believing that approvals may not come until after the 2024 US elections in November. Larry Fink of BlackRock maintains a bullish long-term view, seeing ETFs as stepping stones towards broader tokenization on Ethereum.
Investors will need to learn patience as the approval process could mirror the drawn-out timelines for Bitcoin, keeping the ultimate potential for spot Ethereum ETFs an open question.
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