(Kitco News) – Bitcoin (BTC) price is holding steady in early trading on Friday as the crypto ecosystem is still abuzz following the Securities and Exchange Commission (SEC) approving the first spot Ethereum (ETH) exchange-traded funds (ETFs) for launch in the U.S. in a late announcement on Thursday.
The sudden 180 from the SEC caught many by surprise as most analysts put the odds of approval at just 25% as recently as last week. But those odds jumped over 75% on Monday and increased with each passing day as the regulator scrambled to get the 19b-4 fillings in order after months of non-engagement with filers.
The SEC has approved the 19b-4 fillings from BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, and Franklin Templeton but declined to comment beyond the official decision.
Bitcoin’s price saw the biggest reaction to the news from Monday to Tuesday, climbing from support at $66,000 to hit a high of $72,010, but has since pulled back to support near $68,000 as the market quickly priced in the announcement and then had a ‘sell the news’ type sell-off before the approval came through.
BTC/USD Chart by TradingView
Ether surged from $3,100 on Monday to top out at $3,950 on Thursday, an increase of 27.5%, but has seen volatile trading since the top, including a whipsaw in its price as the ETF approval was announced. At the time of writing, ETH trades at $3,705, a decrease of 1.65% on the 24-hour chart.
While the 19b-4 fillings have been approved, the issuers still need to obtain approval for their S-1 registration statements before their products can begin trading. Bloomberg ETF analyst James Seyffart suggested S-1 approvals could come in a “couple of weeks,” but also noted that they “could take longer” as the process typically takes up to five months.
If the SEC follows a similar timeline as it did in the spot Bitcoin ETF process, the newly approved spot Ether ETFs could launch as early as mid-June.
This outlook was validated by Bloomberg Senior ETF analyst Eric Balchunas, who replied to Seyffart’s thread by saying, “The [important] part is over.”
“Now just logistics,” he added. “My guess is there’s only one round of comments on the S-1s. And during BTC one round took two weeks-ish. So this mid-June is certainly [possible]. Just a guess tho. We will see.”
According to JPMorgan analyst Kenneth Worthington, the bank expects trading for spot Ether ETFs to begin “well ahead of November,” and said it will become “an increasingly political issue ahead of the 2024 U.S. presidential election.”
As for how the ETFs are expected to perform when they finally launch, Seyffart said he anticipates they will see 20% of the flows that spot Bitcoin ETFs have seen, while Balchunas made a smaller estimate in the 10-15% range.
With data from Farside Investors showing the spot BTC ETFs have seen $13.44 billion in net inflow since launching in early January, capturing 20% of that would see spot Ether ETFs record combined inflows of $2.69 billion over a similar timeframe.
Asset manager VanEck is already working to achieve that mark by launching an arty 37-second advertisement enticing viewers to “Enter the ether,” which debuted roughly 30 minutes after the SEC announced the approval on Thursday afternoon.
enter the ether ? pic.twitter.com/YXgKQFP5Nr
— VanEck (@vaneck_us) May 23, 2024
“Could it be the fuel to a less centralized and open-source economy?” the ad asks. “What could Ethereum be? That’s up to you and me.”
Overall, the sudden turn of events and about-face from the SEC is seen as decidedly bullish for the market by analysts across the ecosystem.
"For months, most of the crypto market assumed the SEC would reject the Ethereum ETF ruling to be decided on May 23rd,” said Rachel Lin, co-founder and CEO of SynFutures, in a note to Kitco Crypto. “However, sudden changes turned this calculation upside down. Consequently, Ethereum has seen one of the biggest rallies recently, and it's currently 30% higher than a week ago—and that was before the SEC officially announced their decision to approve a rule change that will set the stage for spot ether ETF approval.”
She noted that “Since the current narrative is entirely driven by Ethereum, the ETH token has significantly outperformed BTC.”
ETHBTC Chart by TradingView
“The ETHBTC pair, which broke below its support level a few weeks ago, has seen a massive reversal and has increased by more than 20% in the past four days,” Lin said. “This has also led to major gains in other altcoins, especially those associated with Ethereum, like Lido, UniSwap, Arbitrum, and Optimism. As a result, Bitcoin dominance has fallen below the 55% level, and it's currently right above a major trendline, which has acted as support since early 2023.”
Bitcoin Dominance
“While the news of the Ethereum ETF is undoubtedly positive, the real excitement lies in the underlying reason for the SEC's sudden change,” she added. “Until recently, the SEC and a faction of the U.S. administration had seemingly pursued an anti-crypto policy to stifle the sector. However, there seems to be a growing political realization within the administration that cryptocurrency is a matter that could sway the election.”
Lin concluded by saying “While it's unlikely that crypto will be a major issue for the vast majority of voters in the U.S., recent actions from U.S. politicians suggest that it has enough support among the population to sway certain politicians.”
