SEC greenlights spot Ether ETFs, but Ether price shows little movement

The price of Ethereum has remained virtually unchanged despite the US Securities and Exchange Commission (SEC) giving the green light for spot Ether exchange-traded funds (ETFs) to launch faster in the US.

Ahead of the SEC’s landmark approval, Ether fell 3.4% and soon recovered by about 5%. As of now, Ether is trading at $3,701 with a 24-hour trading volume of $47.5 billion, according to CoinMarketCap.

ETH 24-hour price chart | Source: CoinMarketCap

On May 23, the SEC approved 19b-4 filings from financial giants such as VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise. This important approval allows these firms to list and trade spot Ether ETFs on their exchanges.

Hashdex was the only ETF issuer that did not receive regulatory approval that day.

But the journey is not over yet for ETF issuers. Before Spot Ether ETFs can officially begin trading, they must receive SEC approval for their S-1 registration statements; This may take weeks or months.

“Typically, it takes a few weeks to a few months for the SEC to review S-1 filings and provide feedback. This period includes a detailed review of filings to ensure compliance with regulatory requirements,” TYMIO founder Georgii Verbitskii told crypto.news. “So we’re looking at the worst case scenario until the end of the summer,” he said.

WE MUST BE CLEAR: This does not mean they will start trading tomorrow. This is just a 19b-4 approval. S-1 documents also need to be approved, which will take time. We expect it to take a few weeks, but it could take even longer. I’ll know more in a week or so!

— James Seyffart (@JSeyff) May 23, 2024

Meanwhile, the securities regulator’s May 20 directive to expedite 19b-4 filings surprised many, especially with the notable removal of staking from several applications. This unexpected move increased speculation about the motivations behind the SEC’s swift action.

Some industry insiders suggest that political pressure played a role. Before the approval, a bipartisan group of lawmakers had called on the SEC to approve these ETFs, arguing that the precedent set by Bitcoin ETFs should extend to Ethereum.

Does the SEC’s ETF approval mean ETH is no longer a security?

Meanwhile, the approval of Ethereum ETFs is seen by industry experts as a slight but significant approval from the SEC, implying that Ether is not considered a security.

“These are commodity-based trust shares, so by approving these, the SEC is clearly saying they are not going to go after Ether,” Bloomberg ETF analyst James Seyffart said on the Bankless podcast.

Digital asset lawyer Justin Browder agrees, saying that if Ether ETFs receive S-1 approval (the final hurdle to trading) “the debate is over: ETH is not a security.”

However, other market players like Verbitskii believe that the SEC may still target ETH.

“Just because the Ethereum ETF has been approved by the SEC does not mean that they no longer view Ethereum as a security. “It just means that the ETF meets regulatory standards for trading and investor protection (or at least they think they do),” Verbitskii said.

Financial attorney Scott Johnsson also noted that the SEC “completely ignored” the issue, noting that it did not confirm Ether’s non-security status in its approval order.

An official statement is expected to be made in the near future from the SEC and some Commissioners that may provide further clarity on this issue.

The approval of Spot Ether ETFs comes four and a half months after the SEC approved several spot Bitcoin ETF applications on January 10, an industry first. Following the latest announcement, industry experts expressed their expectations for further growth.

Sumit Gupta, co-founder of CoinDCX, noted that the price of Bitcoin increased significantly after the ETF began trading in January, suggesting that the spot Ether ETF could create a rally of up to 60%.

“Bitcoin rose from $42,000 to over $73,000 in the two weeks after the ETF began trading on January 11. Data shows 10 US spot Bitcoin ETFs absorbed 548,556 BTC worth $36 billion in four months. Similarly, a spot Ether (ETH) ETF is predicted to lead to a rally of up to 60%,” Gupta told crypto.news.

OKX’s chief commercial officer, Lennix Lai, highlighted the potential for significant institutional demand for the spot Ethereum ETF and predicted passive capital inflows from institutional players of around $300-500 million in the first week.

He emphasized the importance of this development and noted that Ethereum’s design as a Proof-of-Stake (PoS) token could attract significant institutional interest.

“Also, Ethereum offers more benefits than many people realize. It is the go-to product for participating in DeFi products such as Staking. Therefore, the approval of the ETH ETF could potentially enable more users to engage with Web3 products,” Lai concluded.

However, some experts warn that despite the landmark approval, the price of Ether may not increase immediately.

Asal Alizade, co-founder of Blocklogica, explained that the major market shift occurred with the approval of Bitcoin ETFs, which facilitated the inflow of larger cash flows from traditional investment institutions. Therefore, Ether ETF approval may not lead to a dramatic market change but may gradually impact EVM-based assets and create minor trends in the crypto market.

Darewise Entertainment CEO Benjamin Charbit added that the ETF approval has likely been priced in for some time, similar to the Bitcoin ETF approval at the beginning of the year. “I don’t see this as a negative sign; On the contrary, it shows a similar pattern of maturity to what has been experienced in traditional finance (TradFi) for decades,” Charbit said.