SEC Approves Spot Ethereum [ETH] ETFs, But There’s a Catch

After much speculation surrounding the approval of Spot Ethereum [ETH] ETFs, the SEC gave a green light to these financial products a few days ago.

The Securities and Exchange Commission (SEC) finally approved a few spot Ethereum (ETH) exchange-traded funds (ETFs) last week. However, what stood out here was the fact that they only approved the 19b-4 listing applications for ETH ETFs and not the crucial S-1 registration statements.

This split approval raised eyebrows, with some suggesting a possible political influence rather than a thorough review of the ETF proposals. Echoing a similar line of thought, Matt Hougan, CIO at Bitwise, during a recent episode of the ‘Bankless’ podcast said,

“I haven’t seen an example of people having no expectation of approval and flipping to expecting approval so quickly on an effectively overnight basis. So, to the extent that this has never happened again, something was shocking at work here.”

Highlighting the same, James Seyffart, Research Analyst at Bloomberg Intelligence, added,

When asked about the next steps in terms of an ETF, Hougan noted,

“The process between sort of where we are and these ETFs listing is: Issuers have to go back and forth with the division of investment management around exactly what’s in this document.”

Here, he went on to say that while the SEC’s approval of the 19b-4s is a big step forward, the full launch of ETH ETFs now hinges on the S-1 document approval. This could take anywhere between weeks to months.

Now, needless to say, these developments contributed to significant fluctuations in Ethereum’s market cap, initially leading to a decline on the charts. However, at press time, ETH had rebounded to $3,752, up 1.65% in the last 24 hours. The wider market sentiment, led by Bitcoin climbing past $69k, had turned bullish too.

The Bitwise CIO also lent some insight into this matter by stating,

“There’s no new supply, net supply is effectively zero and what that means is that this new demand shock has to buy ethereum from people who don’t have to sell it and that’s just an extraordinarily bullish setup.”

BTC inflows vs. ETH inflows

As for spot Bitcoin (BTC) ETFs, ever since their debut on 11 January, the inflows have been substantial. In fact, recent data by Farside Investors revealed that on 24 May, Bitcoin ETFs saw total inflows of $251.9 million.

Will Ethereum see similar numbers though? According to Hougan, no. He went on to say,

“I don’t think Ethereum ETFs will match Bitcoin ETFs but I do think it will be measured in terms of many billions of dollars.”

The exec expanded on this point by highlighting that Bitcoin’s simplicity as “digital gold” makes it easily understandable, while Ethereum’s role as a platform for decentralized applications is more complex.

Institutional investors, however, are likely to see the value of diversifying and jumping into both BTC and ETH ETFs.