Ethereum Rally Imminent as SEC Approves Rule Change to Enable Spot Ether ETFs Creation
Ethereum (ETH) is poised for a rally following the rule change by the Securities and Exchange Commission (SEC) to facilitate the creation of spot Ether ETFs.
The move to approve the spot Ether exchange-traded funds (ETFs) portrays a shocking u-turn and comes barely six months following the Bitcoin ETFs approval in January. Since then, the spot Bitcoin ETFs have proven successful as net inflows have now cleared past $12 billion, as per FactSet data.
SEC Approves 19b-4s to Enable Ether ETFs Creation
Unlike their Bitcoin counterparts, the spot Ether ETFs are projected to have a slow start. Nonetheless, the rule change by the Gary Gensler-led SEC on Thursday paved the way for the spot Ether ETFs.
The journey to spot ETH ETF approval took a shorter period, though one clouded with uncertainty with analysts revising their odds downwards.
Financial analysts and commentators regularly conveyed their predictions, which turned increasingly pessimistic following the aggressive moves by the SEC that targeted Ethereum-affiliated crypto projects.
Still, analysts pegged late May as a potential date when the SEC would convey a decision on the Ether ETFs, coinciding with the deadline for VanEck Ethereum ETF.
The majority of the companies sponsoring Bitcoin ETFs, such as BlackRock, Galaxy Digital, and Bitwise, initiated the process of launching the ether fund. The firms make up the eight spot ETH ETF applicants, including Invesco Galaxy, ARK21Shares, Franklin Templeton, BlackRock, Grayscale, Van Eck, Bitwise, and Fidelity.
The approval saw Ether’s price rise by 2%, though aligned with the 20% surge witnessed throughout the week in the market-wide boom as the crypto industry anticipated SEC’s decision on Thursday. The calm movement suggests that some investors are on pause, perhaps taking lessons from Consensys chief executive Joseph Lubin, who predicted that SEC’s rule change approval would not guarantee the immediate launch of the funds.
A scrutiny of the SEC’s order reveals that it has greenlighted the proposals from the Nasdaq, NYSE, and CBOE exchanges. They sought changes to the rules to facilitate the trading of Ethereum Exchange-Traded Products (ETPs) and ETFs. The order technically fails to approve the funds and does not set the date to unveil ETF trading until the S1s are approved.
Financial analysts and commentators anticipate the spot Ether ETFs will be smaller at their onset, unlike their Bitcoin counterparts. In particular, the Grayscale Ethereum Trust is estimated to have $11 billion worth of assets, much smaller than the Bitcoin fund before its conversion.
SEC Approve Rule Change: Softening Stance on Crypto?
The stunning turnaround by the SEC is evident in blessing 19b-4 forms linked to the ETFs. A revisit to the post-approval of spot Bitcoin ETFs reveals that the SEC hardly favored engaging with potential issuers on Ether ETFs until the recent change.
The approval of 19b-4 forms portrays the SEC’s soft stance towards crypto following the protracted legal fights and actions against various crypto projects. The twist began in August 2023 when the SEC lost the lawsuit against Grayscale Investments to spur approval for the Bitcoin ETFs.
The SEC push to regulate crypto has suffered intense scrutiny from politicians and legislators alike. The previous week saw the Senate vote to pass Resolution 109 to repeal SEC Staff Accounting Bulletin (SAB 121), which was considered anticrypto by banks custodying digital assets.
Ether ETFs Carry Distinct Features
Ether ranks as the second largest cryptocurrency, and it is now a blue chip coin. Unlike Bitcoin, Ethereum offers a distinctly different value proposition.
Unlike the Ether classification, Bitcoin is regarded as a long-term store of value, as it is an early-stage technology investment. Ether token is behind the Ethereum network, which powers decentralized finance (DeFi), nonfungible tokens (NFTs), and tokenizing real-world assets (RWA).
Richard Kerr, a partner within the K&L Gates law firm, explained that Thursday’s approval of 19b-4s hardly extends to other crypto projects running on the Ethereum network.
Kerr indicated that approval of ether products hardly implies or raises the odds for crypto running on the Ethereum platform earning the greenlight.
Spot Ether ETFs Applicants Remove Staking
Ether ETFs cannot participate in staking opportunities. The exclusion arises from the SEC alleging lawsuits against Coinbase and Kraken, classifying the staking-as-a-service offerings as unregistered securities. This realization prompted Grayscale, Fidelity, and Ark to revise filings and strike off staking from the proposals.
Swan Private and Swan Bitcoin chief Steven Lubka considers the absence of staking in ETF products could cost Ether ETFs less demand, unlike the Bitcoin counterparts.
Lubka considers that the structural differences in Ether could make the ETH ETF less attractive. Such implies that it is unable to match the Bitcoin ETF inflows.
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