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Six months after the milestone launch of spot bitcoin ETFs into the mainstream trading sphere, spot ether ETFs are now trading. The 23rd of July 2024 saw the official launch of eight spot ether ETFs, having been approved several months ago by the U.S. Securities and Exchange Commission (SEC). These two monumental shifts in access to the world of crypto investment have already made 2024 one of the most eventful years in crypto history. Mainstream investors have invested millions of dollars into these funds over the past eight months, given their greater degree of safety compared to direct investment in crypto and exposure to the market’s volatility. Whilst some members of the crypto community remain skeptical over the move to make crypto more mainstream, the surge in the value of Bitcoin and other altcoins thanks to these ETFs has brought a smile to the faces of both short- and long-term holders of the digital asset.
In this article, we take a closer look at what these spot ether ETFs mean for ether and the Ethereum network, how they may impact the wider crypto ecosystem, and whether we expect any more ETF launches in what remains of 2024.
What is a spot ether ETF?
A spot ether ETF allows investors to buy and sell shares that reflect the value of the asset ether on stock exchanges, providing a straightforward and liquid way to invest in cryptocurrency without needing to directly interact with crypto exchanges. Unlike ‘futures’ ether ETFs, which speculate on the future price of ether, a ‘spot’ ether ETF reflects the real-time price of the cryptocurrency by holding the real digital asset in its reserves. Back in May, the SEC approved applications from Nasdaq, CBOE, and NYSE to list spot Ether ETFs, and trading began just last week.
However, there are still some regulatory challenges to contend with, such as the SEC’s stance on staking practices and the potential classification of ether as a security, which could change how it is traded, held, and taxed in the future. Investors that purchase ether ETFs instead of the cryptocurrency directly are also limited to stock market trading hours, compared to the 24/7 trading possibilities offered by crypto exchanges. But despite these hurdles, the prior approval of spot Bitcoin ETFs in January 2024 showed great promise for the most recent launch and helped pave the way for these much-anticipated ether ETFs to enter the market.
The spot ether ETF launch: What happened?
Following the launch of the first series of spot ether ETFs on the 23rd of July, the first day of trading saw a buzz of activity with a total inflow of $106.6 million. But despite the hype, the ETFs faced a challenging first few days. Much like Bitcoin’s 14% dip in value in the two weeks following the spot Bitcoin ETF release, ether (ETH) declined 7.82% in the first three days after the spot ETF launch. Some of this loss can be accounted for with the $1 billion-plus that exited Grayscale’s converted fund (ETHE), while other ETFs also struggled to maintain positive inflows. Despite these challenging early days, the experts remain optimistic about the ETFs’ future performance. Bloomberg’s Eric Balchunas, for example, highlighted the relative performance of the “New Eight” ether ETFs, stating they still have “very healthy inflows/volume.” ETH has now managed to recover from its price drop earlier in the week and has stabilized at around $3,300.
Impacting the wider crypto ecosystem
The recent launch of eight spot ether ETFs has the potential to significantly impact the wider crypto ecosystem by opening the door for more cryptocurrency-based financial products, although their approval still depends on whether they meet stringent regulatory standards set by the SEC. The acceptance of ether ETFs (both spot and futures) indicates a growing maturity and legitimacy of the crypto market and a strong interest from mainstream investors.
The impact of these ETFs will largely depend on the political climate, as regulatory attitudes could shift with changes in government. Historically, the SEC has required a regulated futures market for commodities, a standard currently met only by Bitcoin and Ether, suggesting that futures markets for other cryptocurrencies would need time to develop. Regardless of regulatory hurdles, spot Ether ETFs are expected to see substantial trading activity. As options on these ETFs open up, trading volumes could increase even further, bolstering crypto values and volumes and enhancing the market’s integration into mainstream financial systems.
Potential ETF launches lined up for the future
Following the launch of eleven spot Bitcoin ETFs launched in January, and eight spot ether ETFs in July, experts are speculating about which cryptocurrency will be next. Some believe Solana could be a likely candidate. Known for its speed and cost-efficiency, Solana is gaining traction both for meme token trading and the tokenization of real-world assets, such as U.S. Treasuries. According to the Financial Times, the SEC is set to decide on a Solana ETF by March next year, following applications from VanEck and 21Shares.
Despite past SEC concerns about market manipulation and lawsuits labeling Solana as an unregistered security, the approval of ether ETFs has boosted confidence. However, the absence of a regulated futures market for Solana and the need for significant regulatory changes could delay its approval. Overall, the industry’s optimism hinges on potential political shifts and market demand, meaning that we may not see another major ETF announcement or decision from the SEC until early 2025.
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