Ethereum heats up following key ETF decision. Here’s what you need to know.

Ethereum, the nerdy cryptocurrency it was recently overshadowed by Bitcoin, is in the news again and the price is skyrocketing. Which give?

Well, this is just one of the most important developments in Ethereum history. An Ethereum spot ETF (Exchange Traded Fund) could be approved in the United States today, Thursday, May 23.

Before we get into all that, here’s a very brief introduction to Ethereum or ETH. Launched in 2015 by programmer Vitalik Buterin and others, Ethereum is the second-largest cryptocurrency by market capitalization, behind Bitcoin, and has been for about five years.

What is this Ethereum thing you’re talking about?

Ethereum is a very different beast from Bitcoin. The latter is a digital currency and public ledger of transactions that uses a network of computers (miners) to securely verify each transaction in the system, as well as to create new coins through a computer process called proof of work.

Ethereum is a blockchain platform for decentralized applications. Unlike Bitcoin, it uses proof of participation to power and secure the network, meaning there is no environmentally friendly mining, with validators using a stake of their ether or ETH (the underlying currency of the platform) to validate transactions. Additionally, unlike Bitcoin, which is all about securely sending and receiving bitcoins and not much else, Ethereum is a platform on which other decentralized applications (also known as smart contracts) can run.

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As you can imagine, this makes Ethereum more powerful than Bitcoin in a sense, but it also makes it more complicated, both in terms of usage and implications. These days, virtually everyone – including big banks and pension funds – understands Bitcoin as a largely decentralized digital asset, which can be bought, stored and sold securely, akin to a digital version of gold . Ethereum is much more complicated, with the US Securities and Exchange Commission (SEC) not very clear on whether ETH is a security or not.

An ETH ETF is now a very real possibility

This brings us to the part about ETFs. In January 2024, after receiving the blessing of the SEC, Bitcoin spot ETF funds began trading in the United States. This has had immense implications for who can buy Bitcoin; As a result, an American state pension fund or investment fund could easily gain exposure to Bitcoin without worrying about breaking a rule. And the “spot” part, unlike a futures ETF, means that Bitcoin spot ETFs have to buy real Bitcoins when someone buys their product.

Interest was record, with more than 13 billion dollars flocking to BTC via spot ETFs since their inception. And unsurprisingly, the price of Bitcoin has risen from around $42,000 in early January to around $69,500 at the time of writing.

Crushable speed of light

Many of the same entities – large investment companies such as BlackRock, VanEck and Ark – also filed for a spot Ethereum ETF, with SEC approval or denial deadlines starting May 23. And until a few days ago, analysts widely believed the ETFs would be denied, given the SEC’s previous reluctance to provide clear advice on whether ETH is a security or not.

This has changed. According to Bloomberg senior analyst Eric Balchunas, there was “chat” that the SEC completely reversed its position on Ethereum, followed by a large number of potential ETF issuers submission of amended Forms 19b-4 to the SEC, reporting that there is a very good luck that the ETFs are in the process of being approved.

We know, just the mention of something like a 19b-4 form made you fall asleep instantly. But we mention it because there is another set of forms that must be approved, the S-1 forms, and these are essential to the actual approval of the ETF.

In practice, this means that we might get a very good indication of the arrival of one or more (probably several) Ethereum ETFs, but it may take weeks or months before they actually start trading.

As a result of these deposits, the price of Ethereum rose from around $3,100 to $3,800, where it is trading at the time of writing.

Of course, nothing is official or set in stone. Ethereum ETF applications could still be declined, although the consensus among experts is that the question now is when, not if, this will happen. A refusal would surely be a cold shower for the price of Ethereum, at least in the short term.

This is one of the most important developments for crypto, period

It’s not just about the price of Ethereum. This sudden change in sentiment from the SEC could mean that the US government is suddenly much more open to all things crypto. Indeed, an important element crypto invoice has just been adopted by the United States House of Representatives, despite very harsh comments from SEC Chairman Gary Gensler on this subject.

Perhaps the simplest implication of this approval is that other spot crypto ETFs will get the green light in the future. But with BlackRock launches a tokenized version of its monetary fund on Ethereum, it becomes easy to envision a future in which much of the world’s finance exists on the blockchain. In other words, your nerdy, crypto-mining neighbor who told you that one day all finance would be turned into crypto, might have been right.

And now?

Well, unless you are a trader looking to capitalize on price movements, you really don’t need to do anything. Whether the Ethereum Spot ETF is denied, approved, or delayed today, Ethereum and its application ecosystem will continue to move forward.

But it is important to consider that possible approval fully legitimizes an entirely new crypto asset class. Institutions, funds, banks, and perhaps even pension funds, will be looking to get in on the action, which could spark a boom period for Ethereum, as well as the applications and assets that reside on it. After a slight lull over the past couple of years, the crypto space could become very exciting again over the next couple of years.

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