The approval of spot Bitcoin exchange-traded funds (ETF) by the U.S. Securities and Exchange Commission (SEC) in January 2024 triggered a substantial rise in the bitcoin price. Also, interest in the proposed spot Ethereum ETF has increased.
If approved, it could spark another rally in the cryptocurrency market. Are there any opportunities to make money on the eve of the decision to approve the spot Ethereum ETFs scheduled for 23 May 2024? Octa broker's analysts discuss in the article.
Understanding Spot Ethereum ETFs
Before discussing the features of spot Ethereum ETFs, it is essential to emphasize that they have yet to be approved for trading in the U.S.—but futures Ethereum ETFs have been available for quite some time. Therefore, it is essential to understand the difference.
In a spot market, assets such as commodities, currencies, and securities are exchanged for immediate delivery. The same is true for the much-anticipated spot Ethereum ETFs, as they offer a more straightforward and transparent approach than futures ETFs, which buy derivatives without directly owning the asset. By purchasing cryptocurrency directly, the fund tracks the price of the benchmark cryptocurrency more accurately.
Due to the more straightforward purchase process, such an investment offers greater profitability and lower management costs. This is the reason for the public excitement around the approval of the spot Ethereum ETF, scheduled for 23 May 2024.
So What About the Approvals?
The U.S. Securities and Exchange Commission (SEC) remains concerned that cryptocurrencies are often involved in fraud, which may cause speculative bubbles and cause investors to start considering this currency type safer after approval. Spot Bitcoin ETFs were only approved after the U.S. Court of Appeals ruled against it in August 2023, which essentially forced it to take action.
‘As a basis, we have that the U.S. SEC is still conservative in its views,’ said Kar Yong Ang, the Octa broker's financial market analyst.
At the time of writing, the editing process for the filing cases is transparent. The 10 May 2024 updated filing for the spot Ethereum ETFs shows that Ark Invest and 21Shares have opted out of staking, meaning the funds are adjusting to the regulator's requirements.
Roughly the same thing is happening with other applications. In late April, the commission postponed its review of Franklin Templeton's application with a deadline of 11 June. In May, the SEC postponed a decision on Invesco and Galaxy's application. Before that, the agency extended the review period for a similar application from BlackRock (NYSE:BLK). May 2024 is the deadline for proposals from VanEck and Grayscale.
‘After the decision on VanEck's application, investors will be able to understand what will happen to the other investment companies that have applied,’ commented Kar Yong Ang, the Octa broker's financial market analyst.
Breadcrumb Trails Lead to Launching Funds
Despite scepticism on the legal side of the issue, two factors indirectly report increased investor interest in the second most crucial cryptocurrency.
Grayscale Investments has withdrawn its application to create an Ethereum-based futures ETF. According to the speech of its CEO Michael Sonnenshein, Grayscale Investments will focus on converting its Ethereum trust—the world's largest—to spot exchange-traded products.
Traders are getting rid of Hong Kong Bitcoin ETFs and Ethereum ETFs. So, on 13 May 2024, a record was set for capital outflows from the funds: derivatives lost $39.3 million in one day, BTC-backed assets lost $32.7 million, and ETF-backed assets lost $6.6 million.
'It's clear that the outflows are not only due to the correction in the Bitcoin price during this period' said Kar Yong Ang, the Octa broker's financial market analyst. 'Such ETF flows suggest investors are looking at more interesting and profitable funds,' he added.
The future of spot Ethereum ETFs looks promising due to the recent success of spot Bitcoin ETFs. However, it still depends on the regulator's decision and the actions of investment fund representatives. The decision to approve spot Ethereum ETFs may likely be postponed, which does not cancel its approval. In our opinion, there is potential for growth in these two cryptocurrencies in the combination of such factors and in the conditions of local correction in Bitcoin and Ethereum quotes.