Bitcoin
Approval of the Spot Ethereum ETF: What is the difference between this milestone and the approval of the Bitcoin ETF?
The crypto industry has completed another step towards mainstream acceptance as spot Ethereum exchange-traded funds (ETFs) have been approved by the Security and Exchange Commission (SEC). But what is the difference between this approval and that of Bitcoin in January?
On May 23, 2023, the SEC approved an Ethereum ETF in sight, meaning that certain investment firms could now offer a cryptocurrency ETF for starters. Although the SEC still needs to sign registration statements to VanEck, Black stone, Fidelity, Shades of gray, Franklin Temploton, ARK 21 Actions, Invesco GalaxyIt is Bit by bitIn theory, it won’t be long before these companies can officially start trading Ethereum ETFs.
Interestingly, the news comes at a time when the regulator is deciding whether to classify the digital asset as a security. Additionally, the approval follows more news in the crypto world, as the United States House of Representatives voted in favor of legislation to provide greater regulatory clarity on digital assets.
Is rich Demuthco-founder and CEO of Bitpanda, the trading platform, explains how these discussions fit into the broader picture of global cryptocurrency acceptance: “The SEC’s approval of the ETH spot ETF, after months of politically motivated objections, was long overdue but very welcome.” coming. Despite the SEC’s stance that ETH is somehow a security, we are seeing another important part of the crypto industry unlocked for institutional investors.
“It’s another sign of how the crypto industry is changing and another step towards crypto being treated the same as any other asset class. This approval means new US institutional investors, less volatility, and more evidence of crypto’s long-term future in the world of finance. But let’s be honest: even a rejection wouldn’t have changed much about the positive future of ETH and the entire crypto space.”
Another milestone in a year?!
At the beginning of this year, the cryptography The industry rejoiced when the US regulator announced a major milestone that many had been calling for: Bitcoin ETFs. As a result of this change, US investors, both institutional and retail, were able to track Bitcoin movements and make purchases without having to open an account or digital wallet on an unregulated exchange.
With the recently approved Ethereum ETFs, we aim to find out if this has solidified cryptocurrencies as a legitimate investment recognized by the masses, or if they are still seen as a niche and dangerous investment.
Reacting to the SEC’s first phase approval, Alex Salehhead of partnerships at Coin cover, the blockchain protection firm comments: “This is a welcome surprise given the challenges of Bitcoin ETF approvals and the SEC’s historical hostility toward crypto. The US is the largest ETF market in the world, and where the US moves, others often follow.
“The launch of Ethereum ETFs still needs to go through a second stage of approval, but if given the green light, it would represent a huge vote of confidence in the role that digital assets will play in our financial system and open the floodgates for more such products.”
More exposure
Saleh continues: “The SEC’s action is another sign of the growing appetite for crypto ETFs and could introduce new demand pressure on Ethereum spot prices as exposure to Ethereum would be opened up to a broader group of investors.
“That said, there is still a lot of uncertainty about when Ethereum ETF products will hit the market and which market participants will participate. This uncertainty makes it difficult to predict any changes in demand for the underlying asset that will lead to greater price discovery.”
“This is an exciting time for the crypto community, but there are still risks associated with any new financial instrument. Volatility is a given, and widespread adoption of Ethereum ETFs would lead fund managers to accumulate large amounts of Ethereum through a variety of custody methods. This will be the main target for hacks, attacks and possible human errors. We anticipate higher expectations around risk mitigation and security capabilities, which means security is paramount and should be a top priority for ETF managers.”
Following in the footsteps of the Bitcoin ETF
Danilo SeifertUK national director Coinbase, the global crypto exchange notes how this approval further roots cryptocurrencies into the mainstream investment world. He says: “Coinbase welcomes the approval of this ETF and believes it will have a similar positive impact on the industry as experienced following the approval of the BTC ETFs.
“This move solidifies the fact that cryptocurrency is not just a trend, representing a global transition to digital assets in order to reshape the existing financial system. Expanding the utility of cryptography will have significant effects on innovation and we expect to see an escalation of activity in the market. Coinbase is excited to serve asset managers the full suite of Prime products and drive positive impact on the industry.”
A good step in the right direction, but we need to be cautious
Mona El Isafounder of Vanguard Financea crypto asset management company, explains that while this is a good move for the crypto industry, an ETF takes away part of what makes Ethereum Ethereum.
She explains: “The approval of the Ethereum ETF is a positive development, boosting institutional demand as it is packaged in a way that traditional investors understand. However, the risks lie in the details of how these ETFs will implement, monitor and manage risk, especially if they involve Ethereum staking.
“The centralized nature of these funds contradicts the spirit on which the asset class was built. Owning an ETF makes your investment purely speculative and, ironically, removes some of the key features that originally drove the cryptocurrency’s popularity.
“There are also concerning centralization risks in the current Ethereum staking landscape that need to be addressed. The three main staking pools control more than half of the total staking, leaving just 9% for truly decentralized options. Lido dominates net staking with 85% of the market. It is clear that we urgently need new decentralized and on-chain staking alternatives to break these monopolies.
“While ETFs may increase institutional demand in the short term, the space must resolve these centralization issues to maintain crypto’s value proposition in the long term. The ETF’s hasty timing also appears more politically motivated than grounded in addressing these crucial risks.”
