Key Information on the Growing Ethereum Presence in the US ETF Market

The hype surrounding Bitcoin (BTC) ETFs may have died down, but there is a new wave of excitement building around the possibility of an Ethereum (ETH) ETF. This could potentially take the crypto market to new heights.

In the United States, there is fierce competition to dominate the exchange-traded fund (ETF) market, with a particular focus on prominent cryptocurrencies. While the initial ETFs, both operational and awaiting regulatory approval, were solely tied to Bitcoin, a new wave of ETFs has emerged that allows investors to speculate on the price movements of ETH, the second-largest cryptocurrency.

So why is there a need for cryptocurrency ETFs in the market? The launch of the first ETFs linked to the price of Ethereum came two years after the introduction of the first Bitcoin futures ETF in the United States. This was the Bitcoin Strategy ETF from ProShares, with shares traded under the ticker BITO. At that time, the launch coincided with the peak of excitement surrounding the crypto market, characterized by all-time highs for Bitcoin and other cryptocurrencies. However, the landscape has since changed. The crypto industry is now facing significant regulatory scrutiny worldwide, and trading volumes on crypto exchanges have reached their lowest point in three years.

Cryptocurrency ETFs allow investors to track the price movements of coins without actually owning them. Instead of dealing with exchanges and wallets directly, investors can buy ETF shares through standard brokerage accounts. This investment approach is more popular among clients of management companies or pension funds in the US.

The US Securities and Exchange Commission (SEC) has approved several Bitcoin ETFs, specifically those based on futures contracts. Unlike spot ETFs, futures ETFs do not offer direct ownership of cryptocurrency or involve its delivery. Instead, they track futures contracts that predict the price of the cryptocurrency at a future date. Ethereum futures funds were introduced by several market players on October 2, 2023, including ProShares, Bitwise, and VanEck.

Investor interest in Ethereum could reignite if its prices recover to previous highs, especially considering that many prefer Ether to Bitcoin due to its numerous applications in various projects and financial services. VanEck analysts published a comprehensive report in May 2023, a few months before the launch of their Ethereum ETF, where they shared their findings on the technical aspects of the Ethereum blockchain and its future prospects. Based on their calculations and the demand for ETH as fuel for future infrastructure, they predicted a range of future prices for the coin. According to their estimates, by 2030, the price of ETH could range from $11,848 to over $51,000.

Several market players have applied for Ethereum ETFs, including Valkyrie, ProShares, Bitwise, VanEck, Ark Invest, and BlackRock. Analysts believe that spot Ethereum ETFs could also be approved within a year. Bloomberg analyst Eric Balchunas believes there is a 70% chance that the SEC will approve spot Ethereum ETFs before May. Lawyer Joe Carlasar expects approval before the end of the year, but warns that the process may take longer than anticipated. Bloomberg analyst James Seyffart is confident that the SEC will give the green light to spot Ethereum ETFs, and BlackRock CEO Larry Fink is also anticipating their launch.

However, SEC Chair Gary Gensler is more cautious about Ethereum. While he acknowledged the approval of Bitcoin ETFs, he emphasized that this was specific to Bitcoin as a non-security commodity token.