Ethereum spot ETF will be listed as early as this week
After 8 asset management institutions that plan to issue Ethereum ETFs in the US securities market finally submitted S-1 filings to the US SEC in June 2024, will the Ethereum ETF be successfully issued? When can it be listed for trading? It has always attracted the attention of industry insiders.
Another source said trading could begin on Tuesday after the ETF is deemed effective on Monday.
Eric Balchunas, senior ETF analyst at Bloomberg Intelligence, first reported the development in a social media post.
Various predictions have been rising and falling, and the market value of ETH has also fluctuated frequently due to related information. Why does the Ethereum ETF affect market sentiment so much? In this regard, should we be optimistic and expect to enter the market first, or remain calm and wait and see?should we buy ethereum mining hardware now?
So,what the ETH ETF is and what are its advantages and disadvantages?
As the name suggests, the Ethereum ETF is an ETF that tracks the price of Ethereum (ETH). It allows investors to understand the price trend of ETH without having to deal with the difficulties of managing crypto wallets and exchange accounts. Investors can buy shares of the Ethereum ETF to trade ETH through a familiar investment environment. The Ethereum ETF can hold ETH directly or invest in futures contracts linked to the price of ETH. The first step is to create an ETF fund. Usually, large financial institutions create shares of ETFs by buying ETH and putting it into ETFs. Of course, they can also invest in futures contracts instead of holding ETH. The next step is to track the price of ETH, which is also the purpose of the birth of Ethereum ETF. If the price of Ethereum rises, the value of ETF shares should also rise, and vice versa. Finally, trading, Ethereum ETF shares can be listed and traded on various stock exchanges such as Nasdaq. Investors can buy and sell these shares throughout the trading day, just like stocks.
Ethereum ETFs are also divided into spot and futures. Spot Ethereum ETFs hold actual ETH. When investors invest in spot Ethereum ETFs, the fund buys and holds ETH on your behalf. The value of ETF shares directly reflects the current price of Ethereum in the market. In contrast, Ethereum futures ETFs do not hold actual ETH, but invest in futures contracts based on the price of ETH. These are agreements to buy and sell Ethereum at a fixed price on a certain date in the future. In other words, Ethereum futures ETFs track the price of ETH by speculating on its future price, rather than holding the cryptocurrency itself. Since spot Ethereum ETFs track the current market price of ETH, this allows investors to more easily analyze and predict how price changes affect the value of their ETF shares.
The value of an Ethereum futures ETF is tied to the price of an ETH futures contract, which may also be affected by factors other than the current spot price of Ether, such as market expectations and future price predictions. Therefore, the performance of an Ethereum futures ETF may not always reflect the price movement of ETH as closely as a spot Ethereum ETF. In fact, futures Ethereum ETFs are similar to futures financial products in the real world, trading the expected value of the underlying asset in the future.
For many investors, the process of buying and storing cryptocurrencies can be difficult, which prevents them from investing in the crypto market. Ethereum ETFs allow investors to invest in Ethereum without having to deal with the challenges of crypto wallets and exchanges. This is also what we mentioned at the beginning.
ETFs can be traded on stock exchanges, providing liquidity similar to traditional stocks. This means that investors can trade shares of Ethereum ETFs without having to worry about fees or delays.
In addition, ETFs will receive regulatory protection, providing investors with additional security and transparency. This means that investing in Ethereum ETFs allows them to benefit from the regulatory protection associated with traditional financial markets while being exposed to the crypto market.
Another thing is that Ethereum ETFs can be included in investment portfolios, allowing investors to reduce risk through diversified investments. This is attractive to investors who believe in the long-term potential of cryptocurrencies but do not want to go all out.
Similarly, everything has its pros and cons. ETFs are so good, but they also have their risks. Of course, its risks can basically be said to be the unified risks of the cryptocurrency circle. The cryptocurrency market is known for its price fluctuations. While it can bring considerable gains, it can also lead to huge losses. Investors in Ethereum ETFs are affected by this volatility, and the value of their ETF shares may fluctuate greatly with changes in the price of ETH. Although the Ethereum ETF closely tracks the price of Ethereum, there may still be a difference between the performance of the ETF and the actual price, which is called tracking error. Tracking error can be caused by a variety of factors, such as fees, operational inefficiencies, and changing market conditions.
Through ETFs, digital assets are being integrated into the mainstream financial trading market
This may be one of the most important market significances of issuing crypto asset ETFs.
"You are seeing the birth of a new class of assets." Matthew Hougan, chief investment officer of Bitwise Asset Management, said in an interview with the US media CNBC on July 8, 2024.
Bitwise Asset Management is also one of the issuers of this round of plans to issue Ethereum ETFs in the US securities market. Matthew Hougan also believes that crypto asset ETFs are a story that will continue to develop. The issuance and successful trading status of Bitcoin ETFs in January 2024 are good indicators of future development.
Data released by FactSet show that the scale of capital inflows attracted by the US Bitcoin ETF has already occupied the top 2 in the US ETF rankings in 2024.
As for the issuance of Ethereum ETFs in the US securities market, people also have a lot of expectations for its "money-making power", but at the same time, industry insiders generally believe that the scale of funds that Ethereum ETFs can attract is expected to be smaller than Bitcoin ETFs.
However, as an article published on Bankless.com pointed out: In the first few years, the inflow of funds to Ethereum ETFs may also reach billions of dollars, which is actually a strong start for any ETF.
Matthew Hougan, chief investment officer of Bitwise Asset Management, expressed a more optimistic expectation: "If the Ethereum ETF achieves $5 billion, $10 billion or $15 billion in revenue in the first two years after its launch, it will be a huge success.
At present, in addition to the issuance of ETFs on Bitoicn and Ethereum assets, there are also constant news that the US securities market will release the Solana spot ETF in early July 2024.
On July 8, 2024, the Chicago Board Options Exchange submitted a 19b-4 filing to the US SEC. According to the content of the filing, the news that VanEck and 21Shares, two asset management institutions, plan to list and issue Solana spot ETFs has been confirmed. The US SEC needs to approve the 19b-4 filing submitted by the Chicago Board Options Exchange within 240 days (expected to be March 2025).
Why Bitcoin ETF is issued smoothly in the United States, and Ethereum ETF Is the issuance of ETH confusing?
The main reason is the supervisory dispute.(Why is it so hard to wait for SOL ETF?)
In the US financial regulatory environment, is the digital asset ETH on Ethereum an ordinary asset or an unregistered security? There is still controversy over the determination of this issue. The root cause of the dispute over the nature of ETH is the game of regulatory power - if ETH is identified as an ordinary asset and belongs to a "digital commodity", it will be regulated by the US Commodity Futures Trading Commission; if ETH is considered to have a pattern of staking on the chain to obtain income consistent with the nature of traditional financial "investment contracts", then it may be identified as a security and regulated by the US SEC.
In the United States, the issuance of securities needs to be registered with the US SEC. If ETH is identified as a security and is subject to the supervision of the US SEC, it needs to be registered with the regulatory department before it can be issued and traded; if it is not registered, and the issuer's issuance of securities does not meet the conditions for exemption from registration, this group of Ethereum ETF issuers may face enforcement actions or sanctions from regulators for "issuing unregistered securities" and non-compliant transactions.
However, the digital asset BTC on Bitcoin does not face such regulatory challenges because there is no on-chain pledge, and the asset positioning is more certain, so it can be issued smoothly.
It is worth noting that the US SEC has not commented on the "qualification of ETH" and "whether the Ethereum ETF will be issued" so far, and has not issued any official opinions.
What impact does the Ethereum ETF have on Ethereum?
In order to avoid compliance risks as much as possible, the first batch of asset management institutions that plan to issue Ethereum ETFs in the US securities market have clearly stated in the relevant issuance files that they will not use the ETH held in their ETFs to participate in the on-chain pledge of Ethereum.
Ethereum pledge began with the merger event on September 15, 2022. At that time, Ethereum completed a major transition from the PoW consensus mechanism to the PoS consensus mechanism. For the Ethereum 2.0 version that officially adopts the PoS consensus mechanism, ETH pledge is indispensable, and it is of great significance to maintain the security of the Ethereum mainnet and the growth of ETH's market value.
On the one hand, the larger the scale of ETH involved in staking, the more validators will join the Ethereum network, resulting in a significant increase in the cost and difficulty of hacker attacks on Ethereum, creating a safer environment for on-chain transactions and smart contracts. On the other hand, since the completion of the merger of Ethereum, the supply of ETH has decreased, and the scale of some of the Gas fees destroyed is greater than the number of newly issued ETH. In theory, this supply and demand relationship will gradually form deflation, which is conducive to the increase in the value of ETH.That's why the antminer apw3++ with higher price now.
However, at present, due to the rapid surge in BTC's market value since 2024 and the smooth issuance of Bitcoin ETF, ETH's market value position in the field of blockchain digital assets seems to have been challenged. On the issue of how the issuance of Ethereum ETF will affect Ethereum, most industry insiders choose to focus on the market value management of ETH. They predict that if the Ethereum ETF is issued, the market value of ETH may rebound significantly, breaking through the historical high of $4,867.60 set in November 2021.
Zach Pandl, managing director of research at Grayscale Investments, a crypto asset management company, once told the media: Less than 30% of the total supply of ETH is involved in staking, and about 10% of ETH is locked in smart contracts, which may reduce the number of new ETH available for ETFs to hold. Under such supply and demand, the market value of ETH may be pushed up.
Some media reports also pointed out that due to the tight supply of ETH and weaker liquidity than BTC, the US dollars flowing into the Ethereum ETF may have a greater impact on the market value of ETH.
This may also be one of the important reasons why most people are eager for the US Ethereum ETF to be listed and issued quickly.
As of the end of June 2024, according to data published by Morningstar Direct cited by the media, the US Bitcoin ETF has attracted nearly $38 billion in capital inflows. In the two months after the issuance of the US Bitcoin ETF, the market value of BTC itself soared from more than $40,000 to a maximum of $73,803.25. In contrast, although ETH has risen since 2024, it is far from reaching its previous market value high.
It is an optimistic expectation that ETH's market value can rise. However, since the scale of ETF funds in the traditional financial industry is usually very large, according to the establishment and operation of the US Ethereum ETF, a large amount of ETH absorbed by asset management institutions will no longer participate in the staking of Ethereum. Will this affect the security of Ethereum?
At the same time, if there is a gap between the rewards for participating in staking and the returns of investing in ETFs, will a large number of users who participate in staking for rewards also give up participating in staking? Asset management institutions hold a large amount of ETH and do not participate in staking. Will the market value pricing power of ETH be substantially interfered with or manipulated by asset management institutions? Is this exacerbating another kind of centralization? Will Ethereum's original intention of being a "world computer" be affected?
All this is not certain to happen. Given the global influence and fund absorption capacity of the US securities market, the issuance of the US Ethereum ETF is actually a double-edged sword for the future development and goals of Ethereum.
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