The U.S. Securities and Exchange Commission (SEC) changed its rules to approve spot exchange-traded funds (ETFs) for cryptocurrency Ethereum (ETH-USD).
The decision comes six months after the SEC approved spot Bitcoin (BTC-USD) ETFs. The Bitcoin funds already have seen net inflows of $12 billion. The price of Bitcoin is up 78% over the last six months.
But market reaction to the Ethereum ETF approval was more muted. Ethereum is down 1.7% over the last 24 hours.
What to Know About New Ethereum ETFs
Crypto analysts were taken by surprise. Since the SEC action had been expected by many experts, some said it was a “sell the news” event. Ethereum prices jumped 21% in the five days leading up to the decision. They’re up 58% so far in 2024.
- Julio Moreno of CryptoQuant noted the discount between Ethereum’s price and that of the Grayscale ETF Trust (OTCMKTS:ETHE) disappeared in recent days. The same thing happened before spot Bitcoin ETF approval.
- The ETH ETFs are expected to be smaller than their Bitcoin counterparts.
- Blackrock (NYSE:BLK) will be among the companies sponsoring them. Nasdaq, the NYSE Arca exchange, and the CBOE all plan to list Ethereum ETFs.
- The SEC action did not approve the funds themselves.
- Instead, it approved applications from the exchanges to list up to 8 different Ethereum funds.
- The agency’s view of crypto has been softening since it lost a lawsuit over Bitcoin ETFs to Grayscale last year.
- The SEC still has disputes with some crypto managers. It has a lawsuit against Coinbase (NASDAQ:COIN) and Kraken saying that “staking” as a service represents an unregistered security. Staking lets investors collect interest on Ethereum holdings. A judge ruled against a motion to dismiss the Coinbase suit in March. The removal of staking makes the Ethereum ETFs less attractive, according to many experts.
What Happens Next?
Final approval for specific spot funds could take weeks, but it may be fast-tracked.
It’s clear now that Ethereum is coming to Wall Street in a larger way. Investors who want to put assets into it directly via ETFs will soon have a clear path forward.
On the date of publication, Dana Blankenhorn did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
