Ethereum
What to expect if spot Ether ETFs are approved — TradingView News
The US Securities and Exchange Commission’s (SEC) first deadline for a spot Ether ETF falls on May 23.
Its approval would be a significant event not only for investors, but it could also represent a significant change in the current status quo of US crypto regulation. Many in the crypto community did not expect the SEC to approve an Ether spot. ETHUSD ETFs.
But reports of the SEC requiring updates from applicants and changing filings by U.S. asset managers indicate that a spot Ether ETF could ultimately be approved.
Sebastian Heine, head of risk and compliance at institutional staking partner Northstake, explained to Cointelegraph how a spot Ether ETF would be a “game changer for the entire crypto ecosystem and traditional financial sectors.”
ETF analysts Eric Balchunas and James Seyffart believe the SEC could do a 180-degree about-face on an Ether ETF, even if it becomes an “increasingly political issue.”
What are the expected effects if the spot Ether ETF is approved?
Will Ether ETFs increase the price of ETH?
There is a widespread belief among crypto investors that the price of ETH will rise thanks to spot Ether ETFs, as this will open the door for a new influx of money from investors into traditional markets. Heine said:
“An ETH ETF approval would not only be optimistic for Ethereum but for the entire crypto market, especially in the United States, which holds the largest pool of capital in the world.”
The price of Ether surged more than 20% the day before the ETF deadline “demonstrates the significant amount of money waiting on the sidelines, ready to intervene on any significant catalyst,” Heine noted..
Solo Ceesay, a former securitization investment banker at Citi Bank, told Cointelegraph that he believes ETH’s sudden rise “underestimates” the potential inflow Ethereum could receive, as a lot of money has still not arrived on the ETH market.
Ceesay explained that the potential is significant, because “an ETF now allows rich pockets that were previously barred from investing in the asset to get in the game.”
But there could be a possible setback. Basel Ismail, CEO of investment analytics firm Blockcircle, told Cointelegraph that “the ETH ETF being approved is not yet properly valued.”
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Ismail predicts a “short-lived” pullback similar to that following the approval of Bitcoin ETFs.
Peter M. Moricz, head of partnerships at Bridge DLC.Link and a former derivatives trader, told Cointelegraph that when the ETH ETF spot approval is announced, it will be followed by a purchase event of rumors and news selling.
Nick Cowan, CEO of fintech company Valereum, agreed there could be a pushback. He explained to Cointelegraph that “moves with such high volume are often followed by a sideways move or reversal followed by a sell pullback on the news.”
Cowan described how “retail buyers will flock [FOMO], offering large institutional holders a chance to dump their holdings. He said big investors need big news to change their big positions.
“The challenge is always how much power retailers have to maintain price levels once FOMO has subsided.”
Ismail said the Grayscale Ethereum Trust (ETHE) “still controls [over] $10 billion worth of ETH.
As with spot Bitcoin ETFs, Grayscale’s “management fees are extreme” and he expects ETHE to provide “significant cash outflow for a while until their fees are reduced to be competitive with alternative market options.
Ceesay agrees with Ismail that the market “will definitely see a more pronounced downward pullback.”
However, he believes inflows into ETFs will have a bullish effect on the price of ETH, similar to how BlackRock’s Bitcoin ETF (BTC) provided enough demand to push Bitcoin to new all-time highs.
Moricz said that “institutional money will flow slower to spot the ETH ETF than to spot the BTC ETF,” primarily due to institutional investors’ perception of Ethereum.
Manuel Villegas, digital assets specialist at private bank Julius Baer, told Cointelegraph that “Ethereum’s value proposition is certainly different from Bitcoin.”
Villegas explained how Bitcoin “quickly found its place in a portfolio context for institutional investors, whether as a yield enhancer, store of value or as an alternative asset with diversification potential.”
But as Moricz pointed out, “ETH is more complicated to describe because there are many other use cases.”
For Ethereum to receive consistent flows from a spot Ether ETF, its regulatory classification needs to become clearer so that institutional investors feel more comfortable investing in it.
Ether ETF Approval Could Mark Change in U.S. Regulations
No decision is made in a vacuum.
Crypto lawyer Jake Chervinsky said the policy was driven by politics and pointed out that crypto has won the political battle in recent months. 
Moricz said a recent Senate vote overturning an SEC banking rule — one that many believe would stifle crypto innovation — “could have helped shift sentiment toward faster approval of the ETH spot ETF “.
The sudden transformation of former President Donald Trump’s stance on crypto and open criticism of President Joe Biden and SEC Chairman Gary Gensler’s approach to crypto could also influence the regulator.
Ceesay believes Trump’s support for the crypto industry could force the SEC’s “grip on the asset class to loosen.”
It appears the SEC may try to classify Ether as a security, whereas in past litigation the Commodity Futures Trading Commission (CFTC) has labeled it as a commodity.
This inconsistent classification by U.S. regulators has led to jurisdictional conflicts between agencies and makes it difficult for businesses to expand, the argument goes.
For compliance manager Heine, “approval would signify a crucial change in crypto regulation, highlighting a move towards acceptance and integration.”
The SEC is the regulatory entity responsible for spot approval of Ether ETFs. Therefore, Heine believes that approval “would mark a significant change in their position, potentially signaling an end to the current destructive strategy of regulation by enforcement.”
What’s next after spot Ether ETFs are approved?
Cryptocurrency markets tend to be driven by the anticipation of an upcoming event. So when or if spot Ether ETFs are approved, what happens next?
Some participants in crypto markets, such as decentralized finance investor Cyril, who runs the Telegram channel Wealth Craft, said the markets may not have a successful event to look forward to.
Conversely, Ismail believes that the one-time approval of the Ether ETF could bring new events with “several key beneficiaries.”
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In his view, “the floodgates will reopen to competing and complementary layer 1s, layer 2s and sidechains, which will then trickle down to more speculative alternatives.”
For Ismail, there could also be future crypto ETFs comprising assets found in Grayscale’s existing pseudo-ETFs. He said the industry could see ETF products with XRP (XRP), Cardano (ADA), Polkadot (DOT) and more.