Ten years after ICO, Ethereum spot ETF is officially approved for listing

On July 23, according to official information from the SEC, it has officially approved the S-1 applications of multiple ETF issuers, and the Ethereum spot ETF has been officially approved for listing and trading. It is expected that preliminary trading will take place tomorrow (Tuesday morning, U.S. time) , starting tomorrow night (Beijing time).

According to the notice, the SEC has notified at least two of the eight companies that applied to launch the first US spot Ethereum ETFs that their products can start trading on Tuesday. Products from BlackRock, VanEck and six other companies will begin trading Tuesday morning on three different exchanges: CBOE, Nasdaq and the New York Stock Exchange. Confirm that they are ready to start trading.

This represents another milestone in the encryption industry, and institutions and analysts in the encryption industry have expressed their views.

Cryptocurrency trading platform Coinbase officially stated that today, the U.S. Securities and Exchange Commission (SEC) approved applications for 9 spot Ethereum ETFs. Following the U.S. SEC’s approval of a spot Bitcoin ETF in January this year, the approval of the spot Ethereum ETF marks another important milestone for cryptocurrencies, reflecting continued innovation and an increasingly mature regulatory environment surrounding crypto assets. Coinbase has also become a trusted partner and custodian of 10 Bitcoin spot ETFs and eight newly approved Ethereum spot ETFs.

Bloomberg ETF analyst Eric Balchunas posted on social media, "Jay Jacobs, head of BlackRock's U.S. Thematic and Active ETFs, said in a video promoting Ethereum to ordinary people that although many people think that the main attraction of Bitcoin is Because of its scarcity, many people believe that Ethereum’s appeal lies in its utility. You can think of Ethereum as a global platform for applications that can run without a decentralized intermediary.”

London Investment Management Company. Farside Investors released a report stating, “We believe that the capital inflow of Ethereum ETF may be smaller than that of Bitcoin ETF for the following reasons: Bitcoin ETF was approved first, attracting more attention; before the approval of U.S. spot ETF, Bitcoin exchanges The market for trading products (ETPs) is larger than Ethereum; the lack of staking features makes Ethereum ETFs relatively less attractive; Bitcoin is more relevant as a financial asset, while Ethereum focuses more on decentralized applications ( dApp) and on-chain use. ”

Market maker Wintermute believes that the Ethereum ETF can attract up to $4 billion in capital inflows from investors in the next year. Wintermute predicts that the price of Ethereum could rise by as much as 24% over the next 12 months, driven by these inflows.

As of writing, the price of Ethereum is US$3,445, down 2.5% in 24 hours. The benefits of the adoption of the Ethereum spot ETF seem to have been realized in advance.

Ten years ago, on July 22, 2014, Ethereum officially launched ICO financing. The team raised funds through pre-sale of ETH and raised a total of 31,529 Bitcoins (the exchange ratio is 1 Bitcoin to 2000 Ethereum) , based on the market price at the time, raising more than $18 million.

Two months ago, no one was optimistic about the Ethereum spot ETF, with a pass rate of only 7%, and the pass rate soared to 75% overnight. In the early morning of May 24, the US Securities and Exchange Commission approved multiple Ethereum spot ETFs. Form 19b-4 for ETFs, including ETFs from BlackRock, Fidelity and Grayscale.

Today, the Ethereum spot ETF was officially approved for listing and trading. The Chicago Board Options Exchange (CBOE), Nasdaq Exchange and the New York Stock Exchange are all ready to trade the Ethereum spot ETF.

What difficulties has the Ethereum Spot ETF overcome?

Securities Attributes and POS Concerns

In the past six months, the approval progress of the Ethereum ETF has been affecting the hearts of the community. After this approval, several previous negative views have also been responded to one by one. Unlike the Bitcoin ETF, the road to approval for the Ethereum ETF has been bumpy.

Since Ethereum conducted ICO in 2014 and raised funds, this financing behavior makes ETH likely to be regarded as an asset with security properties. In addition, since Ethereum theoretically has no upper limit on the total amount. Under the PoS mechanism, the additional issuance of ETH is related to network activity. The behavior of large fund holders may cause ETH price fluctuations. According to previous statistics from Glassnode, nearly 55% of the ETH supply is held by 1,041 addresses. These addresses can Significantly affects the upgrade and operation of the Ethereum network.

This also makes the SEC believe that the high concentration of ETH holders will increase the risk of market manipulation. Alex Thorn, head of company-wide research at Galaxy Digital, is therefore pessimistic about the approval of an Ethereum ETF.

According to Alex’s report, after Ethereum shifted to a new governance model called “Proof of Stake (POS)” in September 2022, the U.S. Securities and Exchange Commission (SEC) opened an investigation into the Swiss-based Ethereum Foundation .

"Proof of Stake", although it can help Ethereum get rid of the shortcomings of energy waste and use a model that relies on a network of trusted validators, it actually provides a new excuse for the SEC to try to define Ethereum as a security.

As a compromise, companies applying for ETFs this time, such as Ark Invest, 21Shares, BlackRock, etc., have deleted the pledge part of their ETF proposals, stating that they will not pledge some of the assets of the trust. This measure reduces the risk that ETH will be considered a security, since staking may involve expectations of future returns, which is a characteristic of securities.

Prelude to the Hong Kong Ethereum Spot ETF

Looking back at the crypto market this year, Ethereum appears to be very weak compared to the strength of Bitcoin. The price and increase were not comparable to Bitcoin before, but were unable to compare with altcoins later. During this period, Hong Kong gradually shifted to a more cryptocurrency-friendly policy stance, allowing its Ethereum spot ETF to be approved first in the United States, which brought huge benefits to Ethereum.

On April 15, 2024, the Hong Kong Securities Regulatory Commission officially announced the approved list of virtual asset spot ETFs. Bitcoin spot ETFs and Ethereum spot ETFs of ChinaAMC (Hong Kong), Harvest International, and Bosera International are on the list.

These 6 spot ETF products opened for new subscriptions from April 25th to 26th, and were listed on the Hong Kong Stock Exchange on April 30th. This is also the first time that Ethereum spot ETFs have been listed on a large exchange.

Currently, Hong Kong spot cryptocurrency ETFs are mainly issued simultaneously by China Asset Management (Hong Kong), Boshi Fund (International) and Harvest International, including Boshi HashKey Bitcoin ETF (03008), Boshi HashKey Ethereum ETF (03009), Huaxia Bit Coin ETF (03042), China Ethereum ETF (03046), Harvest Bitcoin Spot ETF (03439) and Harvest Ethereum Spot ETF (03179).

In community research and analysis, the reason why Hong Kong approved Ethereum spot ETF earlier than Europe and the United States is not only due to its flexible regulatory environment and openness to financial innovation, but also due to strong market driving force, geographical and strategic advantages, and The impact of key factors such as seizing pricing power first.

Although initially many community members were not optimistic about this matter and believed that it would have no effect from a market perspective. Now the U.S. SEC has changed its attitude towards Ethereum and approved VanEck’s application. Even if only passing the 19b-4 document does not guarantee the final approval of the ETF, in such a crazy market, any positive factors can be regarded as a huge victory. . Perhaps as Kong Jianping, director of Hong Kong Cyberport, said, "Hong Kong took the lead in passing the Ethereum ETF, which is a life-saving straw for Ethereum."

What impact will the adoption of the Ethereum spot ETF have?

The approval of the Ethereum spot ETF may be unexpected. This is different from the Bitcoin spot ETF. Investors were as early as half a year after the Bitcoin spot ETF was approved. The layout started before the start of the project, and large-scale capital inflows occurred. However, the approval of Ethereum spot ETH is still a milestone event for the encryption industry, and its impact has also laid a positive foundation for the future development of the encryption industry.

Altcoins can be saved?

The most direct impact of the adoption of spot ETF will be reflected in the price. Bitcoin has risen by 75% since the spot ETF was approved, and the impact on the price of ETH after the approval of the Ethereum spot ETF can be seen. However, the news of the adoption of the Ethereum ETF did not immediately shock the altcoin sector, which was still slightly lower than in previous days.

Geoff Kendrick, head of foreign exchange research and digital asset research at Standard Chartered Bank, said: "After approval, we expect the spot Ethereum ETF to drive inflows of 2.39-9.15 million Ethereum in the first 12 months after approval." He added "In U.S. dollars, this is roughly equivalent to $15 billion to $45 billion in assets."

Kendrick added, "Given that we now see Bitcoin reaching $150,000 levels by the end of 2024, this means that Ethereum's The price will reach $8,000. "

In addition to the impact on the price of ETH itself, the Ethereum spot ETF will also have a positive impact on the altcoin market. Because most altcoins in DEX use ETH as their trading pair, the rise in ETH will lead to a passive increase in altcoins.

In addition, some people in the market believe that with the approval of the Ethereum spot ETF, it will have strong reference significance for more cryptocurrencies to apply for ETFs in the future.

Crypto regulatory policies may change

Another important impact of the approval of the Ethereum spot ETF is reflected in the change in the attitude of US regulators towards encryption policies.

The U.S. election is about to begin, and the tendencies shown by the Democratic and Republican parties towards the encryption industry are worthy of attention.

Previously, former US House Speaker Nancy Pelosi was considering supporting a Republican-backed encryption bill, FIT21, when the House of Representatives votes this week. In addition, SAB121, a cryptocurrency accounting standards bill, will also be passed in the near future.

After the adoption of the Ethereum spot ETF, the mainstream view in the market believes that this will have a positive impact on the regulatory environment of cryptocurrency.

Previously, Alex Thorn, director of research at Galaxy Digital, said that the SEC’s regulatory attitude towards Ethereum will try to find a balance between the following two, that is, “ETH” itself is not a security, and “pledged ETH” (or more Far-fetchedly speaking, "Pledged ETH as a Service") are securities.

This is very similar to the demands in the FIT21 bill, which is to clarify which digital assets are regulated by the Commodity Futures Trading Commission (CFTC) and which digital assets are regulated by the Securities and Exchange Commission (SEC). This is important because there are key differences between the definitions of “commodities” and “securities”, which have implications for how they are regulated.

In short, ETH, as a crypto asset class with smart contracts, will have a profound impact on the crypto industry through the adoption of spot ETFs.

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