Cryptocurrency markets are increasingly optimistic about the potential approval of exchange-traded funds (ETFs) that invest directly in Ethereum, the second-largest cryptocurrency after Bitcoin, by the US Securities and Exchange Commission (SEC).
Following the SEC’s previous approval of a Bitcoin ETF, denying an Ethereum spot ETF would necessitate new and compelling arguments from the regulatory body. Analysts at Bernstein see a strong possibility of approval for an Ethereum spot ETF by May, with a near-certain probability within the next 12 months.
“The regulatory framework for Ethereum is akin to that of Bitcoin, and the success of Bitcoin ETFs has set a precedent that asset managers are unlikely to relinquish,” Bernstein analysts observed. “We estimate a 50% likelihood of approval by May and a near-certain probability within the next year.”
As Bitcoin continues to gain traction, Bernstein analysts recommend shifting focus to Ethereum. While Bitcoin’s price has tripled from its 2023 low, Ethereum’s value has doubled. Ethereum, with a current market cap of approximately $350 billion, is positioned for similar institutional adoption due to its staking yield dynamics, environmentally friendly design, and its utility in building new financial markets.
Ethereum futures have been traded as a digital commodity on the CME for the past 2.5 years, with an Ethereum futures ETF launched in October 2023. Major asset managers such as Blackrock, Fidelity, and Grayscale are advocating for an Ethereum ETF.
Institutions are interested not only in launching ETH spot ETFs but also in leveraging Ethereum to build transparent and open tokenized financial markets. According to Bernstein, this extends beyond asset gathering to “transforming financial markets” and creating “accessible, global asset management products” on Ethereum’s decentralized ledger.
“Ethereum holds significant strategic value for institutions as the leading technology platform for financial market transformation, unlike Bitcoin, which is viewed more like digital gold,” Bernstein stated.
While competitors such as Solana, SUI, and Aptos present faster, more integrated blockchain designs, Ethereum has chosen a scalability roadmap driven by an open ecosystem of faster chains built on top of it, known as roll-ups. Despite criticism for fragmentation and complex user experiences, this open ecosystem allows applications to build dedicated chains, offering speedy and customized user experiences.
“As Ethereum’s scalability roadmap unfolds, it will further solidify its position as the backbone of decentralized financial applications,” Bernstein analysts concluded.
