- Ethereum (ETH) is gaining traction as the next probable candidate for an SEC-approved exchange-traded fund (ETF) following Bitcoin’s success.
- Bloomberg analyst Eric Balchunas predicts a 70% probability of the SEC approving an Ethereum ETF by May 2024.
Ethereum’s ETF Prospects Amidst Market Dynamics
In the wake of the recent approval of a Bitcoin spot market ETF, Ethereum is now emerging as a strong contender for the next cryptocurrency to receive a similar nod from the U.S. Securities and Exchange Commission (SEC). According to IntoTheBlock, a respected analytics firm, Ethereum has significantly outperformed Bitcoin following the incorrect announcement of Bitcoin ETF approval. This development indicates a growing sentiment among traders for a potential Ethereum ETF in the near future.
#BlackRock CEO Larry Fink: "I see value in having an #EthereumETF, […] these are just stepping stones on our way to tokenization, and I think this really is the technology where we are going to go." 🚀🚀🚀 #Ethereum #ETH #BitcoinETF #Bitcoin #BTC pic.twitter.com/c2yFCrdwql
— Marcel Knobloch aka Collin Brown (@CollinBrownXRP) January 13, 2024
Ethereum, after Bitcoin, is considered the most likely cryptocurrency to have an ETF approved by the SEC, with Ripple (XRP) also in the running but Ethereum’s ETF seeming much closer.
Ethereum ETF: A Likely Next Step?
As the cryptocurrency market shifts its focus, Ethereum’s performance has been noteworthy. Ether has outperformed Bitcoin by over 10% since the initial false approval news. This surge reflects traders’ anticipation of the approval of Ethereum ETF applications. Blackrock and several other entities have pending applications for Ethereum spot ETFs, and the market is assigning high odds to their success.
Lucas Outumuro of IntoTheBlock noted that Ethereum’s existing futures ETF, coupled with the SEC’s reasoning in the Bitcoin ETF approval, increases the likelihood of an Ethereum spot ETF approval. The SEC’s statement that fraud or manipulation in Bitcoin markets would likely impact futures prices applies similarly to Ethereum, suggesting a parallel approach in ETF approval.
Moreover, traders are accumulating crypto assets supporting Ethereum’s ecosystem, favoring higher beta ETH-related investments. Layer-2 tokens and liquid staking protocols have seen gains of over 10% this week, propelled by extra catalysts in the market.
Bloomberg’s Analysis: High Odds for Ethereum ETF
Eric Balchunas, a Bloomberg analyst, believes there’s a 70% chance the SEC will approve an Ethereum spot ETF once the deadline lapses in May 2024. This prediction comes after the historic approval of the Bitcoin spot ETF, which marked a significant milestone in mainstreaming cryptocurrency investments. Unlike a futures ETF that bets on future prices, a spot product invests directly in the underlying asset, affecting its supply and price dynamics.
Balchunas emphasized that Ethereum‘s spot ETF is closely tied to Bitcoin’s trajectory. The approval of Ethereum’s ETF is seen as following Bitcoin’s lead, suggesting a synchronized progression in the crypto ETF landscape.
However, the path to an Ethereum ETF is not without its challenges. Crypto lawyer Joe Carlasare and SkyBridge Capital’s Anthony Scaramucci caution that the approval process might not be straightforward. Carlasare suggests that the SEC might craft a precedent allowing them discretion in determining which digital asset ETFs are permissible, ensuring they don’t set a blanket rule for all cryptocurrencies.
Adding complexity to Ethereum’s case is the SEC’s shifting stance on whether Ethereum constitutes a security, particularly after its transition to a proof of stake consensus mechanism. This ambiguity might influence the approval process, with Gensler’s leadership at the SEC being a key factor.
Market Reactions and Expectations
The cryptocurrency market is closely watching these developments. Ethereum’s price surge and the growing interest in its ecosystem reflect an optimistic sentiment among investors and traders. The potential approval of an Ethereum ETF is seen as a major catalyst that could further elevate Ethereum’s position in the crypto market.
As the cryptocurrency landscape continues to evolve, the possibility of an Ethereum ETF represents a significant development, potentially opening doors for further institutional investment and broader acceptance of digital assets. With Bloomberg’s analysis pointing towards a probable approval, the market is poised for potential shifts in response to regulatory decisions in the coming months.