Spot Ethereum ETF approval not going as planned

Understanding Spot Ethereum ETFs

Before we get into the features of Ethereum spot ETFs, it is essential to point out that they have not yet been approved for trading in the United States, but Ethereum futures ETFs have been available for some time. It is therefore essential to understand the difference.

In a spot market, assets such as commodities, currencies, and securities are exchanged for immediate delivery. The same goes for the long-awaited spot Ethereum ETFs because they offer a simpler and more transparent approach than futures ETFs, which purchase derivatives without directly owning the asset. By purchasing cryptocurrencies directly, the fund more precisely tracks the price of the reference cryptocurrency. Thanks to a simpler purchasing process, such an investment offers greater profitability and reduced management costs. This is the reason for the public enthusiasm around the approval of the Ethereum spot ETF, scheduled for May 23, 2024.

So what about approvals?

The United States Securities and Exchange Commission (SEC) remains concerned that cryptocurrencies are often involved in fraud, which could cause speculative bubbles and cause investors to start viewing this type of currency as more valuable. safe after their approval. Spot Bitcoin ETFs were only approved after the United States Court of Appeals ruled against them in August 2023, essentially forcing it to take action.

“We assume that the US SEC remains conservative in its views,” said Kar Yong Ang, financial markets analyst at Octa.

At the time of writing, the filing process is transparent. The May 10, 2024 updated filing for Ethereum Spot ETFs shows that Ark Invest and 21Shares have opted out, meaning the funds are adapting to the regulator’s requirements. Pretty much the same thing happens with other apps. At the end of April, the commission postponed its review of Franklin Templeton’s application, with a deadline of June 11. In May, the SEC postponed its decision on Invesco and Galaxy’s request. Before that, the agency extended the review period for a similar request from BlackRock. May 2024 is the deadline for proposals from VanEck and Grayscale.

“After the decision on VanEck’s application, investors will be able to understand what will happen to other investment companies that applied,” commented Kar Yong Ang, financial markets analyst at brokerage Octa.

Breadcrumbs lead to fund launches

Despite skepticism over the legal side of the matter, two factors indirectly signal increased investor interest in the second most crucial cryptocurrency.

Grayscale Investments has withdrawn its request to create an Ethereum-based futures ETF. Grayscale Investments will focus on converting its Ethereum trust, the world’s largest, into spot exchange-traded products, according to CEO Michael Sonnenshein’s speech.

Traders dump Hong Kong Bitcoin and Ethereum ETFs. Thus, on May 13, 2024, a record was set for capital outflows from funds: derivatives lost $39.3 million in one day, assets backed by BTC lost $32.7 million and assets backed by ETFs lost $6.6 million.

“It is clear that the capital outflows are not solely due to the Bitcoin price correction during this period,” said Kar Yong Ang, financial markets analyst at brokerage Octa. “Such ETF flows suggest that investors are looking for more attractive and profitable funds,” he added.

The future of Ethereum spot ETFs looks bright due to the recent success of Bitcoin spot ETFs. However, this always depends on the decision of the regulator and the actions of representatives of investment funds. The decision to approve Ethereum spot ETFs could likely be postponed, which does not negate its approval. In our opinion, there is growth potential for these two cryptocurrencies in the combination of these factors and in the conditions of local correction of Bitcoin and Ethereum quotes.

About Octa

Octa is an international broker that has been providing online trading services worldwide since 2011. It offers commission-free access to financial markets and various services already used by clients from 180 countries with over 42 million trading accounts. The free educational webinars, articles and analytical tools they offer help clients achieve their investment goals.

The company is involved in a comprehensive network of charitable and humanitarian initiatives, including improving educational infrastructure and short-term relief projects supporting local communities.

Octa has also won over 70 awards since its inception, including the “Best Educational Broker 2023” award from Global Forex Awards and the “Best Global Broker Asia 2022” award from International Business Magazine.

Source