Over the last 30 days, Ethereum has seen a robust 20% increase, largely attributed to the recent approval of applications for eight spot-based ETFs. The SEC unexpectedly greenlit these applications on Thursday, May 23, sparking a surge in Ethereum’s price to nearly $4,000, marking a two-month high and igniting a flurry of trading activity.
However, momentum has somewhat stalled in the past few weeks. This can be attributed partially to the overall market’s indecisiveness and also to the fact that the eight ETFs are yet to be launched.
Nevertheless, there’s optimism as the eight applicants have commenced filing the necessary S-1 forms to facilitate the launch of their funds, potentially as early as this month. Anticipation is high that once these ETFs hit the market, they’ll contribute to a steady rise in trading volumes and demand, possibly propelling Ethereum to new record highs in the coming year.
The Spot Ethereum ETF Story So Far
The journey of Ethereum exchange-traded funds (ETFs) traces back to April 2021, when the Canadian securities regulator greenlit the world’s inaugural Ethereum ETF. Managed by Purpose Investments, this spot-based ETH ETF mirrored a similar approval for Bitcoin ETF by the same entity in February of that year.
However, obtaining approval for spot-based Bitcoin and Ethereum ETFs remained challenging in the United States. The Securities and Exchange Commission (SEC) had long maintained its opposition, citing concerns over potential market manipulation.
A shift in the SEC’s stance began in the latter part of 2023, prompted by its perceived setback in the Ripple case and mounting criticism from both the cryptocurrency industry and its allies in Congress. By year’s end, the SEC was engaging with Bitcoin ETF applicants, offering guidance on filing procedures ahead of application deadlines.
On January 10, the SEC surprised many by approving 11 spot Bitcoin ETFs. While skepticism loomed regarding the prospects of Ethereum ETFs receiving similar approval, the regulator broke ground by greenlighting its first batch in May.
Ethereum Price Reacts
Following the approval, Ethereum’s price surged from approximately $3,100 to nearly $4,000 within a few days. It has since stabilized around $3,750 as the applicants prepare to file S-1 registration forms for their respective ETF launches.
BlackRock has taken the lead by submitting the S-1 for its ETF, signaling a potential arrival by the end of June. If other funds swiftly follow suit, the impact on ETH could be significant, with analysts already envisioning substantial growth driven by increased demand.
Forecasts vary widely, with some notably bullish predictions circulating. Standard Chartered, for instance, anticipates ETH reaching $8,000 by year-end, estimating significant inflows of 2.39-9.15 million ether in the first year post-approval.
Analysts at AllianceBernstein take a more conservative stance, projecting ETH to mirror Bitcoin’s 75% gain since its ETF approvals, suggesting a price of approximately $6,200 by the end of September.
Conversely, Andrey Stoychev of Nexo predicts ETH hitting $10,000 by the close of 2024, while crypto trader Lark Davis goes even further, foreseeing a price of $15,000 by the end of the 2024-25 bull cycle.
ETH Outflows and the Future of Crypto
While it’s wise for investors to approach overly optimistic forecasts with caution, there are indications pointing towards a significant price shift as ETFs gear up for launch.
Notably, data from CryptoQuant indicates that more than $3 billion worth of ETH has been withdrawn from centralized cryptocurrency exchanges following the SEC’s approval of eight ETFs on May 23.
This suggests a positive trajectory for Ethereum in the upcoming months. While reaching $10,000 remains a best-case scenario for the year, there’s a strong likelihood that the coin will surpass its current all-time high of $4,878.
Regarding the broader implications for the industry, there’s uncertainty surrounding whether the approval of Ethereum ETFs will promptly pave the way for exchange-traded funds for other altcoins.
While Goldman Sachs’ Mathew McDermott emphasized in late May that the ETF approvals mark a significant psychological turning point for the industry, he also expressed skepticism about their immediate impact on enabling others to launch similar funds.
Nevertheless, there’s little question that the approval of Ethereum ETFs carries considerable weight for the cryptocurrency realm, contributing to its broader legitimization.
In particular, these approvals signify Ethereum’s classification as a commodity rather than a security, offering more regulatory clarity for the industry’s future trajectory.
By enhancing Ethereum’s appeal as an asset within mainstream financial circles, these ETFs have the potential to channel increased capital into the Ethereum ecosystem, thereby supporting the advancement of blockchain technology.
This development represents a notable victory for the cryptocurrency sector, potentially marking the onset of a pivotal phase in its journey towards mainstream acceptance.
