Ethereum
Why Ethereum, Solana, Avalanche and Chainlink are skyrocketing
A potentially historic decision benefits Ethereum and several other cryptocurrencies.
During the last 24 hours, Ethereum (ETH 15.34%) jumped over 25%, from just $3,000 to over $3,700 at one point. This bullish momentum is primarily driven by growing anticipation surrounding the potential approval of an Ethereum spot exchange-traded fund (ETF), a development that could have profound implications for the broader cryptocurrency market.
The SEC Change and Expedited Reviews
For a long time, approval of an Ethereum ETF seemed a distant possibility. Many analysts and market participants believed that Securities and Exchange Commission (SEC) would not greenlight such an ETF because they believed it was a security and not a commodity like Bitcoin (BTC 5.96%), which received its own spot ETF approval in January this year.
However, the sentiment has changed dramatically. Rumors are circulating that the SEC has asked several applicants to expedite the review of their 19b-4s. These applications, essential for the listing of new ETFs, must be corrected, allowing final approval with an S-1 application and thus paving the way for the beginning of ETF trading.
Impact on Ethereum
The prospect of an Ethereum ETF is important for several reasons. First, it would offer investors unfamiliar or uncomfortable with navigating crypto exchanges and digital wallets an easy way to invest. If approved, investors can purchase the Ethereum ETF from their preferred brokerage, just like any other stock.
Yet the most important aspect of a potential endorsement comes in the form of institutional investors. Currently, institutional investors face several obstacles when attempting to invest directly in cryptocurrencies, including custody issues, regulatory uncertainties, and market volatility. An ETF would alleviate many of these issues, making it easier for institutional capital to flow into the Ethereum market.
With easier access, the deep pockets of institutional investors are expected to cause the price of Ethereum to skyrocket. Bitcoin ETFs were already among the most successful ETFs ever launched, and if Ethereum follows a similar path, it could lead to a significant price rise.
Ripple effect on other cryptocurrencies
Although the main focus is on Ethereum, the positive sentiment has spread to other cryptocurrencies. Solana (GROUND 2.37%), avalanche (AVAX 11.07%), and Chain link (LINK 1.64%) have all seen their prices increase by more than 25% in the last 24 hours.
These cryptocurrencies, often called “altcoins”, have recently come under increased scrutiny due to their similarities to Ethereum, namely their proof of participation consensus mechanisms. Many agency officials believe that proof-of-stake cryptocurrencies are closer to a security than a commodity. But with a possible approval of the Ethereum ETF, this opinion could change and could provide a boost to other proof-of-stake cryptocurrencies.
Image source: Getty Images.
Analyst Predictions and Timelines
Although approval of an Ethereum ETF is not yet guaranteed, analysts currently estimate a 75% chance of approval. This optimistic outlook is based on recent actions by the SEC and the growing recognition of Ethereum’s importance in the cryptocurrency ecosystem.
If all goes according to plan, ETFs could start trading around the end of June at the earliest. Applicants will need to review and correct their application, a process that typically takes several weeks.
The potential approval of an Ethereum ETF represents a monumental shift in the regulatory landscape, providing a more accessible and secure investment vehicle for retail and institutional investors. Although the final decision is still pending, current sentiment is overwhelmingly positive and the approval could mark a new era of growth and adoption for the cryptocurrency market.
RJ Fulton has positions in Bitcoin, Ethereum and Solana. The Motley Fool ranks and recommends Avalanche, Bitcoin, Chainlink, Ethereum and Solana. The Motley Fool has a disclosure policy.