Crypto prices have surged due to signs that the US may soon approve exchange-traded funds (ETFs) that invest directly in Ether, the second-largest cryptocurrency.
This has sparked renewed enthusiasm among investors, similar to the excitement seen when comparable Bitcoin ETFs were introduced in January, leading to a significant rally in Bitcoin.
On Monday, Ether saw a nearly 14% rise, its largest jump since November 2022, and continued to climb, reaching $3,675 by 7:31 a.m. in London on Tuesday. Bitcoin also made significant gains, nearing its all-time high of almost $74,000 set in mid-March.
The US Securities & Exchange Commission (SEC) has reportedly contacted at least one exchange and a potential spot-Ether ETF issuer to update their 19b-4 filings, signaling a possible increase in the likelihood of SEC approval. However, while this dialogue is promising, approval is not guaranteed.
ETF issuers need to complete 19b-4 filings and receive SEC approval for S-1 registration statements before launching their products. A decision on at least one spot-Ether ETF application is expected by May 23. The SEC has declined to comment on individual filings.
Social media is buzzing with speculation that the SEC might be more inclined to approve these ETFs, leading traders to quickly adjust their positions. Many had previously dismissed the possibility of approval. Chris Newhouse, an analyst at Cumberland Labs, noted the sudden shift in trader behavior due to this speculation.
Ether, the native token of the Ethereum blockchain, is crucial for decentralized finance, where investors engage in trading, borrowing, and lending via automated software instead of traditional intermediaries.
On Monday, Bloomberg Intelligence ETF analyst Eric Balchunas and his colleague James Seyffart raised their estimated probability of a spot-Ether ETF approval from 25% to 75%. Initially, fund companies had expected rejection because their discussions with the SEC had not been as comprehensive as those before the launch of spot-Bitcoin ETFs.
Despite the optimism, some investors remain cautious. Ravi Doshi, head of markets at FalconX, mentioned that most of their derivatives desk’s counterparties are skeptical, expecting the SEC to move more slowly than the market anticipates.
The SEC, which has been tough on crypto, approved US spot-Bitcoin ETFs reluctantly after a court ruling in 2023. These Bitcoin ETFs, from companies like BlackRock Inc. and Fidelity Investments, have accumulated $58.8 billion in assets, marking one of the most successful fund debuts ever.
BlackRock and Fidelity are also looking to launch Ether funds. The digital-asset industry sees ETFs as a way to broaden crypto’s investor base, attracting capital from retail investors, hedge funds, pension funds, and banks. Notable investors in Bitcoin ETFs include Millennium Management, Steven Cohen’s Point72 Asset Management, and Elliott Investment Management.
