Ethereum ETFs are now live after a long road to launch, following Bitcoin ETF approvals earlier this year. What were the steps to Ethereum ETF approval and what were the reasons it was delayed?
Earlier this year spot Bitcoin exchange-traded funds (ETFs) were finally approved in the US by the SEC. But that milestone raised an important question: when would spot Ethereum ETFs be approved, and when would they go live? Now, we have 9 Ethereum ETFs up and running.
As the second largest cryptocurrency by market cap, speculation that investors could soon be able to trade an Ethereum-based asset on the stock market drummed up significant excitement. However, despite the US launch of spot Bitcoin ETFs, Ethereum seemed poised to face an uphill battle. Until a sudden U-turn in May 2024.
When was the spot Ethereum ETF launched?
Crypto proponents long speculated that an Ethereum spot ETF will, at some point, be approved in the United States. As time passed, many experts in the space turned their attention to when—rather than if—spot Ethereum ETFs will become available for everyday traders.
The SEC approved spot Bitcoin ETFs in January, and Ethereum futures ETFs had already been approved long before. In Spring 2024, the SEC requested three key exchanges, the Nasdaq, CBOE and NYSE, to adjust their listing applications ahead of key decision deadlines approaching on May 23rd for VanEck and ARK 21Shares ETFs.
Approval of the Ethereum ETFs came right in time for that deadline, though it came in a hurry following surprise announcements from regulators. Two months later, nine Ethereum spot ETFs finally launched for trading on July 23, 2024.
The following ETFs are now available for trading:
On the CBOE:
- 21Shares Core Ethereum ETF (CETH)
- BlackRock iShares Ethereum Trust (ETHA)
- Fidelity Ethereum Fund (FETH)
- Franklin Ethereum ETF (EZET)
- Invesco Galaxy Ethereum ETF (QETH)
- VanEck Ethereum ETF (ETHV)
On the NYSE:
- Bitwise Ethereum ETF (ETHW)
- Grayscale Ethereum Mini Trust (ETH)
- Grayscale Ethereum Trust (ETHE)
What is a crypto ETF?
An ETF (or, exchange-traded fund) is a type of investment fund that invests in a certain asset—such as a commodity or group of stocks. Investors can then buy shares in these funds, giving investors exposure to their underlying assets. They can be traded on traditional stock markets, such as the New York Stock Exchange and Nasdaq.
Want the real deal? Trade Ethereum and over 5 million tokens on Matcha!
When it comes to crypto, ETFs offer an easy entry point for those outside of the Web3 world. They allow investors to benefit from the price movements of cryptocurrencies within a regulated framework that mirrors trading traditional stocks.
As a result, a spot Ethereum ETF opens up buying and selling Ethereum to a wider pool of everyday traders, as well as companies and other institutional investors such as pension funds.
The difference between spot and futures ETFs
Importantly, there are two distinct types of exchange-traded funds discussed in the context of cryptocurrencies like Bitcoin and Ethereum. These are spot ETFs and futures ETFs.
When you buy a spot ETF based on a cryptocurrency, the fund manager essentially buys crypto on your behalf. The value of the ETF you hold is then directly determined by the price of the digital asset itself.
In comparison, buying a Bitcoin or Ethereum futures ETF means that you are buying a contract to purchase or sell BTC or ETH at a later date. Here, the value of your exchange-traded fund is determined by the anticipated price floors and ceilings of the underlying asset.
While both types of ETFs serve as a way to give institutional and everyday traders their chance to profit from crypto without having to directly hold coins, spot ETFs seem to be more sought after by the crypto market.
In fact, with the earlier speculation about the potential approval of a spot Ethereum ETF, the price of Ethereum spiked to its highest level since May 2022.
How to invest in an Ethereum ETF
In line with the core use case of exchange-traded funds, investing in an Ethereum ETF is designed to be a straightforward process.
Whereas buying crypto on your own relies on having at least a basic understanding of the Web3 landscape, investing in an Ethereum ETF is as simple as investing in just about any other type of stock.
As Ethereum ETFs are now available on various markets, licensed brokers may allow you to invest in them even if no spot or futures ETF exists in your jurisdiction. This only takes a few steps:
- Research brokers until you find the best choice for your needs.
- Set up an online brokerage account and deposit funds.
- Search for your chosen crypto ETF by its ticker symbol.
- Complete your order.
Or, you can simply invest in Ethereum directly and use it as intended, onchain on Matcha.
Why Bitcoin ETFs were approved before an Ethereum ETF
Bitcoin ETFs beat Ethereum ETFs to the US market for two key reasons.
The first of these reasons boils down to Bitcoin’s popularity. Despite Ethereum’s key role in powering millions of smart contracts, Bitcoin is still often seen as the public-facing representative of the crypto movement. This is largely due to its market cap, word of mouth, and status as the world’s first cryptocurrency.
This has led to significant interest in Bitcoin ETFs, complete with Grayscale filing a lawsuit to chase a positive decision from the SEC on its Bitcoin ETF proposal. Rather than attempt to appeal the court decision, this lawsuit eventually led the SEC to approve spot Bitcoin ETFs.
Second, the approval of a spot Bitcoin ETF was simplified by the fact that the SEC had already repeatedly confirmed that Bitcoin is not security. This reduced the regulatory implications of approving Bitcoin exchange-traded products.
Ethereum, however, has been referred to as a security in some rare instances—though the SEC has never formally referred to it as such. Were Ethereum to unanimously receive the same categorization as Bitcoin as a “non-security commodity”, the path to a spot Ethereum ETF would have been far more straightforward.
Fortunately, the final May 2024 deadline for the SEC to rule on two key Ethereum ETF proposals pushed Ethereum past the gate to join Bitcoin in leading the charge for crypto exchange-traded funds.
What the SEC said about Ethereum ETFs
With the launch of Bitcoin ETFs, many proponents speculated that a spot Ethereum ETF is the logical next step. However, this sentiment was not echoed by the Securities and Exchange Commission (SEC) itself.
Following the decision on Bitcoin ETFs, SEC Chair Gary Gensler said that Bitcoin’s approval will not set a precedent for exchange-traded products (ETPs) backed by other cryptocurrencies like Ethereum.
"Today’s Commission action is cabined to ETPs holding one non-security commodity, Bitcoin," said Gensler, in a statement published on the SEC’s website. “It should in no way signal the Commission’s willingness to approve listing standards for crypto asset securities.”
In spite of this statement, the popularity of Ethereum and the fact that Ethereum ETFs have been approved in nearby jurisdictions suggested that a spot Ethereum ETF may get the greenlight.
Dissenting voices within the SEC itself also played a role in making this a reality, as some members hold a positive sentiment towards approving spot crypto ETFs. This was especially evident in a statement by Commissioner Hester Pierce.
“Perhaps the one silver lining here is now that we know that the Commission can execute a robust correlation analysis, perhaps the road to approving other spot crypto ETPs will not be as bumpy,” she wrote.
Who was behind the spot Ethereum ETFs approval?
Since the approval of the US Bitcoin ETFs, experts had been giving divided opinions on when Ethereum would be given the same treatment by regulators.
Generally, what these experts agreed on is that the key date to watch was May 23rd. This date was the SEC’s final deadline to rule on a proposal for a spot Ethereum ETF by VanEck.
Earlier more flexible deadlines had continually been delayed by the SEC. This included the January 18 deadline for a spot ETF proposal by Fidelity, which was pushed back to March 5, and had a final deadline of August 3rd, 2024.
Opinions differed drastically, however, when it came to speculating on how likely it was that spot Ethereum ETFs will be approved by this deadline.
According to Bloomberg ETF analyst Eric Balchunas, the chance of an Ethereum spot ETF being approved by May was as high as 70%.
However, JPMorgan was not as bullish. In a note to clients cited by CoinDesk, the firm expressed its skepticism that the SEC will give its approval by May of this year. Instead, the firm’s analysts believed that the chance of the first US spot Ethereum ETF being approved in this timeframe was less than 50%.
Meanwhile, in a statement to Cointelegraph, digital asset lawyer Joe Carlasare expressed his belief that Ethereum ETFs will likely be approved this year, but not in the timeframe that many people are anticipating.
“Ethereum spot ETFs will be approved,” he said. “[But] the SEC will try to carefully craft a precedent that permits them to retain some discretion in determining which digital asset ETFs will be permitted to come to market.”
Were there already Ethereum ETFs before?
While a spot Ethereum ETF has yet to be approved in the US, Ethereum futures ETFs have already hit US stock exchanges.
Last year, a groundbreaking decision by the SEC saw the first ever Ethereum futures ETFs receive approval in the United States. In October 2023, nine Ethereum futures ETFs arrived on US stock exchanges.
As Cointelegraph reported at the time, however, these futures ETFs launched to an underwhelming response from the market
Ethereum ETFs on non-US markets
Ethereum exchange-traded funds have existed outside of the US market for a few years now. This includes spot Ethereum ETFs, which have already been available for trading right next door to the United States.
Back in 2021, Canada made history when it became the first country to approve a direct custody Ethereum ETF. Since then, it has been possible for everyday traders to buy and sell Ethereum ETFs on traditional exchanges such as the Toronto Stock Exchange.
While Canada made history in North America, the continent next door was not far behind. That same year, Brazil became the first country in Latin America to approve an Ethereum ETF.
Should you expect other cryptocurrency ETFs?
Currently, it is difficult to predict whether or not the approval of a spot Ethereum ETF will lead to other crypto ETFs following suit.
On the one hand, there are several prominent cryptocurrencies in the landscape that play a similar role to Ethereum. It stands to reason that the approval of an Ethereum ETF could therefore illuminate the pathway for these projects to receive their own spot ETFs.
At the same time, however, it is clear that the SEC is cautious about a potential influx in crypto ETFs. In fact, part of the SEC’s trepidation in approving a spot Ethereum ETF was the possibility of setting a precedent that would allow firms to launch similar exchange-traded products (ETPs) based on other cryptocurrencies.
In the same way that Bitcoin’s ETF approval did not automatically mean that Ethereum received the go-ahead, it is likely that the Ethereum ETF approval will not eliminate the barriers for other crypto assets.
Ultimately, only time will tell how many cryptocurrency ETFs will end up in the reach of everyday investors. For now, one of the most important dates to watch in the crypto landscape—in late May—turned out positive to crypto.
To keep up with breakthrough developments in the crypto space and learn how to best navigate the landscape, make sure to stay tuned to the Matcha blog.
.jpg)
