Ether ETFs Receive Green Light from U.S. SEC

This decision comes after the SEC approved Bitcoin ETFs in January, a major turning point for the sector. The approval was a sweet victory for both the applicants and the broader cryptocurrency industry.

On Thursday, the U.S. Securities and Exchange Commission (SEC) approved applications from leading exchanges such as Nasdaq, CBOE, and NYSE to list exchange-traded funds (ETFs) linked to the price of Ether (ETH). This decision potentially clears the path for these ETFs to start trading later in the year, pending further approvals.

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The approval came as a sweet victory for both the applicants and the broader cryptocurrency industry, which was preparing itself for a rejection of such filings until Monday. This change comes after the SEC approved Bitcoin ETFs in January, which was a major turning point for the sector.

Image: US SEC's paper presenting the approval of Ether (ETH) spot ETFs

Nine issuers, such as VanEck, ARK Investments/21Shares, and BlackRock, are leading the pack. They will launch ETFs linked to Ether(ETH), the second-largest cryptocurrency. 

Andrew Jacobson, Vice President and Head of Legal at 21Shares, said that this was an “exciting moment” for the industry and was “a step closer to actual trading of these products”. 

It was expected to reverse at the onset of the market, especially as the SEC had been silent on the applications. Nevertheless, in a dramatic move that surprised the industry, SEC officials asked the exchanges to enhance their filings quickly, condensing what insiders expected would take at least several weeks into a few days. Some key questions arising from this development include why the SEC has made this dramatic switch in its position. 

Cboe Global Markets’ global head of ETP listings, Rob Marrocco, said that:  

“The introduction of spot bitcoin ETFs has already demonstrated significant benefits for the digital assets and ETF space, and we believe that spot ether ETFs will similarly provide safeguards for U.S. investors."  

This was during an industry event on Thursday. When asked about the ether ETFs, Gensler, who is still heading the SEC and has been quite sceptical about the crypto space, did not have much to say. An SEC official also confirmed the approval through an email, but the agency would not want to say anything more on the matter.

During an industry event on Thursday, when asked about the ether ETFs, the chairman of the SEC, Gary Gensler, who has been very sceptical about cryptocurrencies, did not want to respond.  

It is important to note that the approval process is still ongoing since the SEC has yet to approve the registration statements of the ETFs that contain information regarding investors. This phase has no fixed duration, and it remains unclear how long it will last. Market analysts believe that despite many issuers being ready for the launch, the SEC’s corporate finance division will likely demand changes in the next few days or weeks.

Earlier, the SEC had declined to approve spot Bitcoin ETFs for over a decade because of manipulation risks. The SEC only approved the offering after Grayscale Investments recently emerged victorious in a court case last year.

 The lack of standardisation makes it difficult for the SEC to review registrations since ether is more complicated than Bitcoin. Still, after the approval of Bitcoin ETFs, the SEC can only do so much to engage in slow rolling. 

This week's decision is quite encouraging for the cryptocurrency market and the industry’s move towards the financial mainstream. This accords with the approval of listed cryptocurrency products in the United Kingdom and the passage of a significant bill in the United States House of Representatives to clarify the regulation of cryptocurrencies. However, before this bill becomes law, it needs Senate support, and its current support from both parties is a major boost for the industry.

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ETH Price Struggles to Rally After Approval

Ethereum’s price witnessed passive volatility ahead of the ETF approval, leading to $132 million long liquidations.

In the tense hour preceding the official approval, ETH initially dropped to $3,500 around the traditional U.S. market close hour.

Subsequently, it surged close to $3,900 upon the emergence of initial unconfirmed reports suggesting approval, then settling above $3,800 after confirmation.  

Amidst these massive fluctuations in price, it turns out that a whale had sole 7,900 ETH holdings worth $29 million.

Even after the U.S. SEC approved a total of 8 spot ETH ETFs, the coin’s price has stayed at $3,800 without showing any signs of a major uptrend. The good thing is that ETH has already been rallying more than 30% during the past week, and investors are currently waiting on the sidelines to see whether this turns out to be yet another sell-the-news event.

The Ethereum price has soared by almost 45% in the past two weeks alone, mirroring the surge seen in the Bitcoin’s price in the run up to the approval of spot Bitcoin ETFs earlier in January.

At time of writing, Ethereum is trading at approximately $3,725.

While the approval of the Bitcoin ETFs led to strong institutional inflows, it will be interesting to see whether the Ether ETF launch could lead to greater institutional adoption.