As far as cryptocurrencies are concerned, it seems that the buzz for exchange-traded funds (ETFs) is only getting started. Recently, the US Securities and Exchange Commission (SEC) approved 11 spot Bitcoin (BTC) ETF applications, which resulted in the cryptocurrency crossing the $47,000 level. Despite BTC’s volatile nature, this step is believed to have bolstered the cryptocurrency’s inclusion into traditional financial systems. So, what is next in store for this market? From what it’s understood, the Ethereum blockchain has emerged as a likely candidate for spot ETF approval. “I think Ethereum ETFs are investment funds that are traded on stock exchanges and track the price of Ethereum, the second-largest cryptocurrency by market capitalisation. These ETFs can allow investors to gain exposure to the price movements of Ethereum without owning the cryptocurrency itself. Investing in Ethereum ETFs can offer a way to gain exposure to Ethereum, which can bypass the complexities of cryptocurrency ownership,” Sumit Ghosh, co-founder and CEO, Chingari, a Web3.0 live streaming application, told FE TransformX.
In layman’s terms, an Ethereum ETF refers to a monetary instrument which helps supervise Ethereum’s price changes and allows its trading on conventional stock exchanges. Market research suggests that Ethereum ETF-based investments should be taken into account based on factors such as diversification, which allows expansion of one’s portfolio, liquidity, which enables share trading at stock exchanges, simplicity, which prevents one from the need of actually having Ethereum, accessibility, which permits Ethereum transactions using established brokerage accounts, and regulations, which keep Ethereum-based transactions under the supervision of conventional monetary markets. Going by media reports, a spot Ethereum ETF approval could be on its way as early as May 2024. While analysts of JPMorgan Chase & Co, a multinational finance corporation, have predicted a 50% chance of the spot Ethereum ETF approval happening in 2024, Matt Kunke, research analyst, GSR, a crypto market expertise platform, gave a 75% possibility through an official blog post. According to market experts, the principal cause behind SEC not yet authorising spot Ethereum ETFs is that the blockchain still hasn’t been classified as either a security or a commodity, which can lead to regulatory drawbacks.
“I believe the Ethereum ETF approval would imitate the performance of Ethereum, providing access to Ether’s (ETH) value but without the difficulties that come with owning the crypto. Along with accessibility, diversification in investment portfolios is one of the benefits. Ethereum could be more accessible to traditional investors, thus increasing the adoption of ETH which would bring higher liquidity to the ETH market. It has a less chance of being approved because the SEC hasn’t given clarity on whether ETH is a security or not,” Roshan Aslam, founder and CEO, GoSats, a BTC rewards platform, highlighted.
Despite mixed reactions around the Ethereum ETF approval timeline, market reports have shown Ethereum’s native cryptocurrency ETH to benefit largely from it. Insights from a report published by Standard Chartered, a multinational bank, has shown that ETH could clock a roughly 70% increase in value from its prevailing price and reach the $4,000 price level by May. Depending on how the spot BTC ETF approval increased ETH’s price by nine percent to a 20-month high within 24 hours, traders are expected to look forward to the spot Ethereum ETF approval for more rise in ETH value. Standard Chartered has also given the prediction that ETH wouldn’t have to endure the amount of selloffs that BTC endured after ETF authorisation. For example, the current Grayscale Ethereum Trust constitutes a lesser amount of total Ether market capitalisation in comparison to the BTC amount kept by Grayscale Bitcoin Trust (GBTC). Reportedly, platforms which have applied for spot Ethereum ETFs include Hashdex, Ark Invest, Grayscale, BlackRock, VanEck, Invesco-Galaxy, and Fidelity. Overall, the spot BTC ETF authorisation is understood to have set the tone for spot Ethereum ETF approval in the second and third quarters of 2024. As of February 6, 2024 (1.26 pm, Indian Standard Time), Ethereum’s value stood at nearly the $2,350 level with a total market capitalisation worth nearly $300 billion, as per CoinMarketCap, a crypto price-tracking website.
“Looking ahead, the future of Ethereum ETFs seemingly depends on regulatory developments and market demand. If approved and launched in 2024, they could play a role in mainstreaming Ethereum and cryptocurrencies as investment assets. However, there are also risks and uncertainties, including regulatory hurdles and market volatility which could affect their success. Overall, Ethereum ETFs have the potential to reshape the crypto landscape by providing accessible and regulated investment opportunities for a wider range of investors,” Sathvik Vishwanath, co-founder and CEO, Unocoin, a cryptocurrency exchange, concluded.
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