The anticipation around the Securities and Exchange Commission (SEC) possibly approving a spot ether ETF has ignited speculation among altcoin investors about the potential for a broader acceptance of cryptocurrency-based exchange-traded funds (ETFs). Recent developments suggest an increased probability that the SEC might greenlight such offerings, starting with Ethereum.
According to Bloomberg ETF analysts James Seyffart and Eric Balchunas, the likelihood of the SEC approving a spot ether ETF has dramatically increased from 25% to 75% following constructive dialogue between the SEC, exchanges, and ETF applicants. This shift is partly attributed to the SEC’s engagement with stakeholders about necessary amendments to their 19b-4 exchange rule change requests—a process essential for the approval of new ETFs.
The news of potential SEC approval was bolstered by reports from The Wall Street Journal and CoinDesk, citing insiders familiar with the matter. Additionally, a note from David Han at Coinbase Institutional revised its outlook for a spot ether ETF, signaling growing optimism.
UPDATE: It's happening. We have at least 5 of the potential #Ethereum ETF issuers that have submitted their Amended 19b-4's in the last ~25 min.
— James Seyffart (@JSeyff) May 21, 2024
Fidelity, VanEck, Invesco/Galaxy, Ark/21Shares, & Franklin all submitted via CBOE. pic.twitter.com/pHGt8iRWi8
Broader Implications for Altcoins
This burgeoning confidence in an ether ETF could set a precedent for other cryptocurrencies. Currently, numerous altcoins like Litecoin (LTC), Chainlink (LINK), and Solana (SOL) are traded on US exchanges via trusts. The logic among altcoin proponents is that if the SEC permits the conversion of Grayscale’s bitcoin trust into an ETF, similar allowances could follow for other crypto assets, provided they are not classified as unregistered securities by the SEC.
However, the landscape is nuanced. While some trusts hold crypto assets not designated as securities by the SEC, others include those explicitly recognized as unregistered securities. The differentiation in regulatory status among these cryptocurrencies could influence the SEC’s decisions on approving ETFs for them.
Ethereum’s potential edge in the ETF space is further underscored by its futures contracts listed on the Chicago Mercantile Exchange (CME), a factor absent for many other altcoins. This established market presence might facilitate SEC approval for an Ethereum-based ETF, a scenario less probable for altcoins without similar futures markets.
Future Outlook
The SEC’s current engagement and requests for more detailed applications are viewed as positive signs by market observers. They contrast with the previous perception that the SEC was generally disinterested or likely to reject such filings. If the SEC proceeds with an approval for Ethereum, it could mark a significant shift in its stance towards cryptocurrency ETFs.
Meanwhile, amid these regulatory developments, Ethereum’s price has experienced a substantial rally, increasing by 29% over the past week, further highlighting market enthusiasm for potential regulatory approvals.
As the SEC continues to navigate this complex regulatory landscape, the outcomes of these deliberations will likely have profound implications for the broader cryptocurrency market and its integration into traditional financial systems.