(Kitco News) – Cryptocurrencies continue to enjoy one of their best years on the adoption front as the U.S. Securities and Exchange Commission officially (SEC) approved multiple spot Ethereum (ETH) exchange-traded funds to begin trading on Tuesday, giving both institutional and mainstream investors easy access to the second-ranked crypto by market cap.
The approval from the SEC came in an afternoon announcement on Monday, setting the stage for products from BlackRock, Fidelity, 21Shares, Bitwise, Franklin Templeton, VanEck, and Invesco Galaxy to begin trading on Tuesday morning.
“The trading of Ethereum ETFs in the US marks a historic moment for our firm and the broader digital assets industry,” said Ophelia Snyder, Co-Founder and President of 21Shares, in a note to Kitco Crypto. “Trading activity across the suite has evolved as expected. We believe that Ethereum's true potential will be realized over the long-term and are encouraged by the recent embrace of crypto as an asset class in the U.S.”
“The approval of these ETF products is creating a more favorable environment for increased participation from U.S. investors in the digital assets’ ecosystem,” she added. “The demand is there, and now U.S. investors can gain market exposure to the innovative power of the Ethereum blockchain through the ETF wrapper on a regulated exchange.”
Snyder called the launches a “net positive for professional and retail investors in the U.S., for crypto as an asset class, and for Ethereum to continue powering the next generation of the internet and the technology investments associated with it.”
While the launches are a major development for the cryptocurrency ecosystem, thus far it looks as though the event was priced in as Ether’s price has traded sideways near support at $3,480 since the SEC announced approval on Monday.
ETH/USD Chart by TradingView
“Today marks an important milestone for Crypto assets,” said Chanchal Samadder, Head of Product at ETC Group. “The Bitcoin ETFs opened the door, but Ethereum ETFs mark a foundational moment for the relationship between cryptocurrencies and institutional investors.”
“Ethereum is not just a token; it is a decentralized tech platform and represents the foundational layer of Web3,” he added. “This also means that Ethereum and Bitcoin are complementary assets, not exclusive, which is an important consideration when examining the investment case and the impact of the ETFs.”
“We expect approximately 1.65 bn USD potential net inflows into US Ethereum ETFs 3 months after the trading launch, with a performance effect of approximately 92%, judging by historical trends,” Samadder said. “So, despite the fact that flows are most likely significantly smaller than for the Bitcoin ETFs, they are still bound to have a significant performance effect nonetheless.”
“The approval of spot crypto ETFs signals another pivotal moment in the global transition toward digital assets,” said Brett Tejpaul, Head of Coinbase Institutional. “This wave of interest is not just a trend; it's a transformative force, reshaping the financial system and solidifying crypto's lasting presence in the financial landscape.”
“The spot Bitcoin ETFs have already become the fastest-growing ETFs of all time, with $17 billion of net inflows since approval earlier this year,” he added. “And now, the approval of ETH ETFs continues this momentum and gives investors yet another way to invest in the increasingly mainstream crypto economy.”
The launch of U.S. spot ETFs for a second digital asset is expected to open the door for other digital asset ETFs to receive approval, which should further accelerate the adoption of digital assets.
“The adoption rate of digital assets and institutional involvement has accelerated far faster than anticipated at the beginning of the year,” said Konstantin Shulga, co-founder and CEO of Finery Markets. “Market sentiment has turned bullish, with strong performance observed across exchanges, OTC markets, and other sectors.”
“For example, Ethereum trading volumes rose by 32% in the first half of 2024 compared to the same period in 2023 in the OTC market,” he said. “Consequently, we can reasonably expect further market strengthening in response to the swift approval of the ETH ETF. However, it is essential to recognize that beyond the initial hype, business routines prevail.”
Addressing the muted market response at the launch of the ETFs, Shulga said, “The full impact of ETF approvals on the market may not be fully realized until six to nine months later, as it typically takes this time for innovative products to be fully integrated into financial players' product portfolios and gain widespread adoption.”
“We saw a significant BTC rally following the launch of BTC ETFs,” he noted. “Anticipation for ETH, the second-largest digital asset, is high, especially in the current bullish market. Research indicates Ethereum's higher sensitivity to global ETP flows compared to Bitcoin. However, we should remain patient and account for volatility and potentially inflated expectations.”
“The key point is that the approval marks a significant shift in regulatory sentiment, signaling the irreversible institutionalization of crypto,” Shulga concluded. “Institutions are entering the crypto space, creating vast opportunities to capitalize on this trend.”
The launch of spot Ether ETFs is also expected to provide a boost to the wider Ethereum ecosystem, including decentralized finance protocols and layer-two (L2) networks.
“Interest in ETH, especially amongst institutions, is a great indicator that sophisticated investors understand that ETH is not just the ‘silver’ to BTC's ‘gold’ as a cryptocurrency, but an appreciation that ETH is ultimately the main rail for tokenization,” said Adam Levine, SVP of Corporate Development at Fireblocks. “Ethereum L2s are where there's a lot of innovation, and where public and permissioned chains can support traditional financial use cases - such as payments, tokenized bonds, etc.”
"Spot Ether ETFs beginning to trade today is another validation of blockchain and crypto as an asset class,” said Paul Marino, Chief Revenue Officer at GraniteShares. “This is just the beginning of the long-term build-out of cryptocurrencies with different characteristics, functions, and utilities. The coins are a product of the usage of the specific blockchain, and as usage grows, we believe the value of the coins will too. This will undoubtedly benefit Coinbase as it is the leading platform for trading Bitcoin and cryptocurrency assets.”
“In January, the launch of Bitcoin ETFs opened the door for crypto assets in traditional markets,” said Greg Moritz, co-founder and Chief Operating Officer at Alt-Tab Capital. “Now, in our opinion, the SEC’s approval and the launch of Ethereum ETFs mark the acceptance of this new class of digital assets and the clear demand from institutional finance for greater participation in cryptocurrencies.”
“Bitcoin and Ethereum should be seen as complementary investments,” he added. “Ethereum is more than a token; it is a key Web3 platform that presents a different level of complexity than Bitcoin. While Bitcoin has prospered from the narrative of it being a digital equivalent to gold, Ethereum’s value is significantly driven by actual utility, as it is the launchpad for thousands of applications and millions of smart contracts.”
“We believe that it is unfortunate that staking has been removed since initial applications; however, as an investment asset, we think that Ethereum has strong fundamentals, real-world applications, and some of the best leadership in crypto,” he concluded.
“Very excited to see the launch of spot Ether ETFs in the US,” said Greg Taylor, Chief Investment Officer at Purpose Investments.
“It's great to see growing options for investors seeking regulated exposure to digital assets,” he said, “not only with the launch of spot Ether ETFs in the US, but just last month, with our launch of an Ether ETF with enhanced returns from staking. We believe investors that are looking to hold Ether long-term would want exposure to staking.”
“It'll be important now to look at Canada not only for a preview into potential market innovations in the US, but also at our rigorous investor protection measures that ensure Ether ETFs do not come at the expense of security and trust,” Taylor concluded.
