U.S. regulators have given the green light for exchange-traded funds (ETFs) that hold Ethereum’s ether (ETH), granting American investors access to a second major cryptocurrency via easily tradable vehicles.
This decision marks the culmination of a years-long effort to get ether ETFs approved by the Securities and Exchange Commission (SEC). It follows the regulator’s approval of bitcoin (BTC) ETFs in January. By packaging ether in an ETF, these funds become more appealing to traditional investors, as they can be bought and sold through conventional brokerage accounts. Since their introduction, bitcoin ETFs have attracted tens of billions of dollars in investment.
Approval for ether ETFs seemed uncertain just weeks ago. However, in late May, SEC officials unexpectedly resumed communication with potential ETF issuers after a prolonged silence. On May 23, the regulator approved a critical filing, paving the way for the final approval.
“We’ve now fully entered the ETF era of crypto,” said Matt Hougan, Chief Investment Officer at Bitwise. “Investors can now access more than 70% of the liquid crypto asset market through low-cost ETPs.”
Kyle DaCruz, Head of Digital Assets at VanEck, added, “Being the first to file for an Ethereum ETF back in 2021, we have long believed investors should have access to Ethereum exposure in a vehicle they find accessible and familiar. If Bitcoin is digital gold, then Ethereum is the open-source App Store and the gateway for exposure to the thousands of applications that will utilize blockchain technology.”
Impact on Ethereum’s Price
The approval and trading of spot bitcoin ETFs in January, which became the most successful launch in the history of exchange-traded products in terms of rapid capital inflow, propelled the price of bitcoin to new all-time highs, surging more than 58% within two months.
Some analysts predict that while a spot ETH ETF could drive the price of ether up to $6,500, the inflows into these funds may not match those of their bitcoin-focused counterparts.
Research firm Steno Research anticipates that the newly launched ETFs could see $15 billion to $20 billion in inflows in the first year, roughly equivalent to the amount spot bitcoin ETFs have garnered in just seven months. Unlike bitcoin, Ethereum lacks the “first-mover advantage” and a compelling narrative like bitcoin’s “digital gold” status, according to a report by the firm.
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