- The US SEC has approved all ETH spot ETF applications submitted to it.
- This approval has had a series of expected consequences for the broader cryptocurrency market.
In a surprising turn of events, the U.S. Securities and Exchange Commission (SEC) approved eight applications for spot Ethereum [ETH] Exchange Traded Funds (ETFs) on May 23.
The regulator has approved 19b-4 forms for the ETF applications filed by BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy and Franklin Templeton.
Before this week, it popped up that the SEC was unlikely to approve the Ethereum ETFs due to a lack of communication with issuers. However, this changed earlier this week when the SEC entered into discussions with issuers and requested the filing of 19b-4 forms.
However, this approval does not mean that spot ETH ETF will become immediately tradable. In a after on X (formerly Twitter), Bloomberg ETF expert James Seyffart noted that ETF issuers need to get their S-1 forms approved.
On the timeline for this, Seyffart said:
“Normally this process takes months. In some examples, for example, up to 5 months, but Eric Balchunas and I think this will be at least somewhat accelerated. Bitcoin ETFs had a minimum shelf life of 90 days. “
Now that Ethereum ETF has been approved…
Just like with Bitcoin [BTC] spot ETF, the approval of ETH ETF is expected to lead to significant capital inflows.
According to a Citi analysisnet inflows into BTC spot ETFs between January 4, when they were approved, and May 20 totaled $13 billion.
These inflows led to a surge in the price of BTC, pushing it to a new all-time high of $73,750 on March 14. This suggested that the coin registered a 6% price increase per $1 billion inflow.
If similar market cap-adjusted flows are applied to ETH, Citi estimates that inflows could be between $3.8 billion and $4.5 billion, potentially increasing ETH prices by 23%-28%.
According to CoinMarketCaps data, ETH exchanged hands at $3,798 at the time of writing. A 28% increase in value would see it change hands at $4,861.
This would represent a price level still below the all-time high of $4,891 that the leading altcoin recorded three years ago.
Some analysts believe that the adoption of the spot ETF will push the price of ETH past its current all-time high.
Ethereum ETF Will Send ETH to $10,000?
In a recent one interview Joining Cointelegraph, Andrey Stoychev, the head of prime brokerage at Nexo, opined that ETF approvals could push the price of ETH to $10,000 by the end of the year.
Stoychev said:
“ETH ETFs in the US and similar products in Asia could be the driving force that sees assets reach $10,000 by the end of 2024, overtaking Bitcoin’s post-ETF performance.”
Furthermore, there is an ongoing debate over whether the adoption of ETH spot ETF would result in an increase in reward staking on the Ethereum network.
According to Matthew Sigel, Head of Digital Assets at VanEck, returns from staking protocols will soar as ETH moves from these protocols to these ETFs.
However, this shift could have security implications for the broader Ethereum ecosystem. If ETH stakers continue to withdraw their previously staked coins and move them to the newly approved ETFs, it could weaken the security of the Ethereum network.
The security of the Ethereum network depends on staked coins. Less deployment of ETH could mean fewer validators securing the network, making it more vulnerable to attacks.
On the other hand, some believe that this would not be a non-issue, arguing that ETH ETF may not provide investors with enough returns to entice stakers to withdraw their coins from the staking protocols.
In a recently published reportCCData Research noted:
“Hypothetically, if you had opened a 1,000 ETH position with an ETF provider on January 1, 2023, instead of holding native Ether, which provides staking rewards, you would have missed out on a profit of over $200,000.”
Regarding the impact of this approval on the overall cryptocurrency market, broker says, Bernsteinhad opined in a recent report it sent to its client that the Biden administration could take a softer stance on crypto ahead of November’s presidential election.
The regulator’s approval of the ETH spot ETF thus marks a positive shift in its stance on the crypto sector.
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The market in the last 24 hours
After news of the approval emerged, ETH’s price climbed to a high of $3,993 before a 5% correction, causing it to change hands at $3,798 at the time of writing.
This price drop led to significant liquidations of long ETH positions, totaling $92 million. according to to Coinglass data.
Source: Coinglass