Yesterday, the American Securities and Exchange Commission (SEC) approved the applications for spot Ethereum, or – to be precise – Ether, exchange-traded funds (ETFs). This follows the approval of Bitcoin spot ETFs in January, marking another significant and somewhat unexpected development in the crypto asset space. This is all you need to know about the spot Ether ETFs.
What does the approval mean?
The SEC’s green light for Ether ETFs significantly broadens access to the crypto asset Ethereum for a wider audience, particularly institutional investors such as companies, insurance firms, pension funds, etc. While these entities could previously have hold Ether directly, the introduction of ETFs provides various simplifications. Investors are very familiar with the financial market products of ETFs. They are comfortable with their structure, understand their risks etc. Consequently, the potential market size for Ether will now considerable grow due to the availability of these ETFs.
Which ETFs were approved?
A total of eight ETFs received approval, namely:
- Grayscale Ethereum Trust
- Bitwise Ethereum ETF
- Blackrock’s iShares Ethereum Trust
- VanEck Ethereum Trust
- ARK 21Shares Ethereum ETF
- Invesco Galaxy Ethereum ETF
- Fidelity Ethereum Fund
- Franklin Ethereum ETF
The approval process we have seen yesterday mirrors that of the Bitcoin ETFs, where all applications were approved simultaneously.
Why is this approval somewhat surprising?
Historically, the SEC has been quite cautious regarding cryptocurrencies other than Bitcoin, often calling them securities. Just a few weeks ago, the approval of Ether ETFs seemed somewhat off the table. However, leading analysts such as Bloomberg’s Eric Balchunas and James Seyffart recently adjusted their forecasts for approval from a 25% likelihood to 75%. This super sudden and short-term shift, driven by increased interactions between the SEC and applicants after months of silence, suggests a political influence.
How much volume is expected for Ether ETFs?
Predicting volume – or assets under management – is of course challenging. While Bitcoin spot ETFs set numerous records, it’s unlikely that Ether ETFs will match these figures. Bitcoin remains the leading crypto asset by market capitalization and investor interest, amongst others. As a ballpark estimate, analysts Balchunas and Seyffart estimate that Ether ETFs might capture 10 to 20% of the assets under management seen in Bitcoin ETFs.
When will the ETFs start trading?
Unlike the quick rollout of Bitcoin ETFs, Ether ETFs are not expected to start trading immediately. A few additional approvals are still pending (namely, so called S-1 documents), though these are generally considered formalities. Trading could begin within the next few weeks.
Will Ether ETFs also be available in Germany?
No, European regulations prevent the creation of ETFs based on a single underlying asset, such as Eth. However, several exchange-traded products (ETFS), which are different from ETFs, are already available for investors in Europe.
What’s next?
It is likely that other countries will begin to allow Ether ETFs, following the lead of the U.S. and similar to the trend with Bitcoin ETFs. There is now considerable speculation about which crypto asset might be next to have an ETF. Discussions about Solana ETFs have already started on platforms like X. While I do not expect another crypto asset to get an ETF this year, the shifting political landscape towards a more crypto-friendly stance could bring surprises.
