Ethereum
Ethereum ETF Spot Approval: How is this stage different from Bitcoin ETF approval?
The crypto industry has taken another step toward mainstream acceptance as Ethereum spot exchange-traded funds (ETFs) have been approved by the Security and Exchange Commission (SECOND). But how is this approval different from Bitcoin’s approval in January?
On May 23, 2023, the SEC approved a spot Ethereum ETF, which means that, as a first step, some investment companies could now offer a cryptocurrency ETF. Although the SEC must still approve registration statements for VanEck, black rock, loyalty, Shades of grey, Franklin Templeton, ARK 21Shares, Invesco GalaxyAnd BitwiseIn theory, it should not be long before these companies can officially start trading Ethereum ETFs.
Interestingly, the news comes at a time when the regulator is deciding whether or not to classify the digital asset as a security. Additionally, the approval follows more news in the crypto world, with the U.S. House of Representatives voting in favor of legislation to provide greater regulatory clarity on digital assets.
Eric Demuthco-founder and CEO of Bit Panda, the trading platform, explains how these discussions fit into the broader framework of global acceptance of cryptocurrencies: “The SEC’s approval of the ETH spot ETF, after months of political objections, was long awaited but is welcome. Despite the SEC’s stance that ETH is something of a security, we see another key part of the crypto industry unlocked for institutional investors.
“This is yet another sign of how the crypto industry is evolving and another step towards crypto being rightly treated the same as any other asset class. This approval means new US institutional investors, less volatility, and more evidence of the long-term future of crypto in the world of finance. But let’s be honest: even a rejection wouldn’t have changed much the positive future of ETH and the entire crypto space.
A new milestone in one year?!
Earlier this year, the crypto The industry rejoiced when the US regulator announced an important step that many had been calling for: Bitcoin ETF. With this move, US investors, both institutional and retail, would be able to track Bitcoin’s movements and make purchases without having to open an account or digital wallet with an unregulated exchange.
With the recently approved Ethereum ETFs, we looked to see if this has solidified cryptocurrencies as a legitimate investment recognized by the masses, or if they are still considered a niche and dangerous investment.
Reacting to the SEC’s first-stage approval, Alex Salehhead of partnerships at Currency cover, the blockchain protection company comments: “This is a pleasant surprise given the challenges with Bitcoin ETF approvals and the SEC’s historical hostility towards crypto. The United States is the largest ETF market in the world, and where the United States moves, others usually follow.
“The launch of Ethereum ETFs still needs to go through a second stage of approval, but if given the green light, it would represent a major vote of confidence in the role digital assets will play in our financial system and open the floodgates to more of these products.”
More exposure
Saleh continues: “The SEC’s decision is another sign of the growing appetite for crypto ETFs and could introduce further demand pressure on Ethereum spot prices, since exposure to Ethereum would be opened up to a broader pool of investors.
“That said, there is still a lot of uncertainty around when Ethereum ETF products will hit the market and which market participants will participate. This uncertainty makes it difficult to predict any changes in demand for the underlying asset that would lead to new price discovery.
“This is an exciting time for the crypto community, but any new financial instrument always carries risks. Volatility is a given, and widespread adoption of Ethereum ETFs would lead to fund managers accumulating large amounts of Ethereum across a range of custody methods. This will be a prime target for hacks, attacks and possible human errors. We expect higher expectations for risk mitigation and security capabilities, meaning security is paramount and must be a top priority for ETF managers.
In the footsteps of the Bitcoin ETF
Daniel SeifertUK Country Director Coinbase, the global crypto exchange notes how this approval further entrenches cryptocurrencies in the traditional world of investing. He states: “Coinbase welcomes the approval of this ETF and believes it will have a similar positive impact on the industry as experienced with the approval of BTC ETFs.
“This move reinforces that cryptocurrency is not simply a trend, representing a global shift to digital assets to reshape the existing financial system. The expansion of crypto utility will have significant effects on innovation, and we expect an escalation of market activity. Coinbase is excited to serve asset managers with the full suite of Prime products and further the positive impact on the industry.
A good step in the right direction but you have to be careful
Mona El-Isafounder of Avant-garde Financea crypto asset management company, explains that while it is a good move for the crypto industry, an ETF takes away part of what makes Ethereum Ethereum.
She explains: “The approval of the Ethereum ETF is a positive development, driving institutional demand because it is presented in a way that traditional investors understand. However, the risks lie in the details of how these ETFs will implement, monitor and manage risk, especially if they involve staking Ethereum.
“The centralized nature of these funds contradicts the philosophy on which the asset class was built. Owning an ETF makes your investment purely speculative and ironically removes some of the key characteristics that initially led to cryptocurrency’s popularity.
“There are also concerning centralization risks in the current Ethereum staking landscape that need to be addressed. The top three staking pools control more than half of the total stake, with only 9% remaining for truly decentralized options. Lido dominates liquid staking with 85% of the market. It is clear that we urgently need new decentralized on-chain staking alternatives to break these monopolies.
“While ETFs can drive institutional demand in the short term, the space needs to address these centralization issues to maintain crypto’s value proposition in the long term. The ETF’s rushed timing also appears more politically motivated than based on managing these crucial risks.
