Ten years from ICO to ETF, Ethereum spot ETF officially approved for listing

On July 23, according to official information from the SEC, it has officially approved the S-1 applications of multiple ETF issuers, and the Ethereum spot ETF has been officially approved for listing and trading. It is expected that preliminary trading will begin tomorrow (Tuesday morning, US time, tomorrow night, Beijing time).

According to the content of the notice, the SEC has notified at least two of the eight companies that applied to launch the first US spot Ethereum ETF that their products can start trading on Tuesday. Products from BlackRock, VanEck and six other companies will begin trading on three different exchanges on Tuesday morning: the Chicago Board Options Exchange (CBOE), Nasdaq and the New York Stock Exchange, all of which have confirmed that they are ready to start trading.

This represents another milestone in the crypto industry, and institutions and analysts in the crypto industry have expressed their views.

Coinbase, a cryptocurrency trading platform, officially stated that today, the U.S. Securities and Exchange Commission (SEC) approved the application of 9 spot Ethereum ETFs. Following the approval of the spot Bitcoin ETF by the U.S. SEC in January this year, the approval of the spot Ethereum ETF marks another important milestone for cryptocurrency, reflecting the continued innovation and increasingly mature regulatory environment around crypto assets. Coinbase has also become a trusted partner and custodian of 10 Bitcoin spot ETFs and 8 newly approved Ethereum spot ETFs.

Bloomberg ETF analyst Eric Balchunas said on social media, "Jay Jacobs, head of U.S. thematic and active ETFs at BlackRock, said in a video introducing Ethereum to ordinary people that while many people believe that the main attraction of Bitcoin lies in its scarcity, many people also believe that the attraction of Ethereum lies in its practicality. You can think of Ethereum as a global platform for applications that can run without decentralized intermediaries."

London investment management company Farside Investors released a report saying, "We believe that the inflow of funds for Ethereum ETFs may be smaller than that of Bitcoin ETFs for the following reasons: Bitcoin ETFs were approved first and attracted more attention; before the approval of U.S. spot ETFs, the market size of Bitcoin's exchange-traded products (ETPs) was larger than that of Ethereum; the lack of a pledge function makes Ethereum ETFs relatively less attractive; Bitcoin is more relevant as a financial asset, while Ethereum focuses more on decentralized applications (dApps) and on-chain use."

Market maker Wintermute believes that Ethereum ETFs will attract at most 10% of investors in the next year. Wintermute predicts that Ethereum’s price could rise by as much as 24% in the next 12 months, driven by these inflows.

As of writing, the price of Ethereum is $3,445, down 2.5% in 24 hours. The positive news of the Ethereum spot ETF passing seems to have been realized in advance.

Ten years ago, on July 22, 2014, Ethereum officially launched ICO financing. The team raised funds by pre-selling ETH at the time, raising a total of 31,529 bitcoins (the exchange rate was 1 bitcoin for 2,000 Ethereum). According to the market price at the time, the funds raised exceeded $18 million.

Two months ago, the Ethereum spot ETF went from no one optimistic and the approval rate was only 7% to the approval rate soaring to 75% overnight. In the early morning of May 24, the U.S. Securities and Exchange Commission approved the 19b-4 forms of multiple Ethereum spot ETFs, including ETFs from BlackRock, Fidelity and Grayscale.

Today, the Ethereum spot ETF was officially approved for listing and trading. The Chicago Board Options Exchange (CBOE), Nasdaq and the New York Stock Exchange are all ready to trade the Ethereum spot ETF.

What difficulties did the Ethereum spot ETF overcome?

Securities attributes and POS concerns

In the past six months, the progress of the approval of the Ethereum ETF has always been a concern of the community. After this approval, several previous negative views have also been responded to one by one. Unlike the Bitcoin ETF, the road to the approval of the Ethereum ETF has experienced many obstacles.

Since Ethereum conducted IC0 in 2014 and raised funds, this financing behavior may make ETH be regarded as an asset with securities attributes. In addition, since Ethereum theoretically has no total upper limit. Under the PoS mechanism, the issuance of ETH is related to network activity, and the behavior of large fund holders may cause ETH price fluctuations. According to previous statistics from Glassnode, nearly 55% of the ETH supply is held by 1,041 addresses, which can significantly affect the upgrade and operation of the Ethereum network.

This also makes the SEC believe that the high concentration of ETH holders will increase the risk of market manipulation. Alex Thorn, head of company-wide research at Galaxy Digital, was pessimistic about the approval of the Ethereum ETF based on this.

According to Alex's report, after Ethereum switched to a new governance model called "Proof of Stake (POS)" in September 2022, the U.S. Securities and Exchange Commission (SEC) launched an investigation into the Swiss-based Ethereum Foundation.

Although "proof of stake" can help Ethereum get rid of the defect of energy waste and use a model that relies on a trusted validator network, it actually provides the SEC with a new excuse to try to define Ethereum as a security.

As a compromise, companies applying for ETFs this time, such as Ark Invest, 21Shares, and BlackRock, have deleted the pledge part in their ETF proposals, indicating that they will not pledge part of the trust's assets. This measure reduces the risk of ETH being regarded as a security, because staking may involve expectations of future returns, which is precisely a feature of securities attributes.

Prelude to Hong Kong Ethereum Spot ETF

Looking back on the crypto market this year, Ethereum appears to be very weak compared to the strength of Bitcoin. The price and increase were not as good as Bitcoin before, and not as good as altcoins later. During this period, Hong Kong gradually shifted to a more friendly policy stance towards cryptocurrencies, which made its Ethereum spot ETF approved before the United States, which brought huge benefits to Ethereum.

On April 15, 2024, the Hong Kong Securities and Futures Commission officially announced the list of approved virtual asset spot ETFs, including Bitcoin spot ETF and Ethereum spot ETF under China Asset Management (Hong Kong), Harvest Global, and Bosera International.

These six spot ETF products opened for new subscription from April 25 to 26 and were listed on the Hong Kong Stock Exchange on April 30. This is also the first time that Ethereum spot ETF has landed on a large exchange.

Currently, Hong Kong spot cryptocurrency ETFs are mainly issued by China Asset Management (Hong Kong), Bosera Funds (International) and Harvest International, including Bosera HashKey Bitcoin ETF (03008), Bosera HashKey Ethereum ETF (03009), China Asset Management Bitcoin ETF (03042), China Asset Management Ethereum ETF (03046), Harvest Bitcoin Spot ETF (03439) and Harvest Ethereum Spot ETF (03179).

In the community's research and analysis, the reason why Hong Kong approved Ethereum spot ETFs earlier than Europe and the United States is not only due to its flexible regulatory environment and open attitude towards financial innovation, but also affected by key factors such as strong market driving force, geographical and strategic advantages, and the first step to seize pricing power.

Related reading: " Hong Kong BTC and ETH spot ETFs passed, what is the significance to the industry? "

Although many community members were not optimistic about this matter at first, believing that it would not work from a market perspective. Now that the US SEC has changed its attitude towards Ethereum and approved VanEck's application, even if the approval of the 19b-4 document alone does not guarantee the final approval of the ETF, in such a crazy market, any positive factors can be regarded as a huge victory. Perhaps, as Kong Jianping, director of Hong Kong Cyberport, said, "Hong Kong was the first to pass the Ethereum ETF, which is the life-saving straw for Ethereum."

What impact will the approval of the Ethereum spot ETF have?

The approval of the Ethereum spot ETF may be unexpected. Unlike the Bitcoin spot ETF, investors began to lay out their plans half a year before the Bitcoin spot ETF was approved, and there was a large-scale inflow of funds. But for the crypto industry, the approval of Ethereum spot ETH is still a milestone event, and its impact has also laid a positive foundation for the future development of the crypto industry.

Is there a way out for altcoins?

The approval of spot ETFs will have the most direct impact on prices. Bitcoin has risen by 75% since the approval of spot ETFs, and the impact of the approval of Ethereum spot ETFs on ETH prices is evident. However, the news of the approval of Ethereum ETFs did not immediately shake up the altcoin sector, and there was a slight drop compared to the previous few days.

“Upon approval, we expect the spot Ethereum ETF to drive inflows of 2.39-9.15 million Ethereum in the first 12 months after approval,” said Geoff Kendrick, head of foreign exchange research and digital asset research at Standard Chartered Bank. “In U.S. dollar terms, this is roughly equivalent to $15 billion to $45 billion in assets,” he added.

Kendrick added, “Given that we now see Bitcoin reaching $150,000 by the end of 2024, this means that Ethereum will reach $8,000.”

In addition to the impact on the price of ETH itself, the Ethereum spot ETF will also have a positive impact on the altcoin market. Because the absolute majority of altcoins in DEX use ETH as a trading pair, the rise of ETH will bring about a passive rise in altcoins.

In addition, some market opinions believe that with the approval of Ethereum spot ETF, it will be a strong reference for more cryptocurrencies to apply for ETF in the future.

Crypto regulatory policies may change

Another important impact of the approval of the Ethereum spot ETF is the change in the attitude of US regulators towards crypto policies.

The US election has begun, and the inclinations of the Democratic and Republican parties towards the crypto industry are worth paying attention to.

Previously, former US House Speaker Nancy Pelosi was considering supporting a Republican-backed crypto bill FIT21 when the House voted this week. In addition, there is also a cryptocurrency accounting standards bill SAB121 that will be resolved in the near future.

《 Critical moment! Major progress in the US crypto bill will be decided at the end of the month 》

After the Ethereum spot ETF was passed, the mainstream market view is that this has a positive impact on the regulatory environment of cryptocurrencies.

Previously, Alex Thorn, head of research at Galaxy Digital, said that the SEC's regulatory attitude towards Ethereum will try to find a balance between the following two: "ETH" itself is not a security, while "pledged ETH" (or more far-fetchedly, "pledged ETH as a service") is a security.

This is very similar to the demands in the FIT21 Act, which is to clarify which digital assets are regulated by the Commodity Futures Trading Commission (CFTC) and which digital assets are regulated by the Securities and Exchange Commission (SEC). This is important because there are key differences between the definitions of "commodities" and "securities," which will have an impact on how they are regulated.

In short, as a crypto asset class with smart contracts, ETH will have a profound impact on the crypto industry if the spot ETF is passed.

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