The long-awaited approval of spot Ethereum (ETH) exchange-traded funds (ETFs) by the United States Securities and Exchange Commission (SEC) on May 23, 2024, has set the stage for their potential launch as early as mid-June.
This development follows a similar path as the spot Bitcoin ETF approvals, which paved the way for their launch roughly four and a half months ago.
TLDR
- Ethereum ETFs could potentially launch as early as mid-June 2024, pending S-1 registration approvals.
- VanEck has already filed its amended S-1 documents, taking the lead among the approved applicants.
- Analysts estimate Ethereum ETFs could attract 10-20% of the investment flows witnessed by Bitcoin ETFs.
- Concerns exist about potential outflows from the Grayscale Ethereum Trust into the new ETFs.
- The SEC’s approval process involved the Division of Trading and Markets, leading to speculation about potential challenges from Commissioners within 10 days.
The SEC’s green light for the 19b-4 filings of eight applicants, including VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Bitwise, and Invesco Galaxy, marks a significant milestone in the crypto industry.
However, the process is not yet complete, as the approved applicants must now amend their S-1 registration statements and receive SEC approval before trading can commence.
According to Bloomberg ETF analyst James Seyffart, the S-1 approval process could take a couple of weeks, although it typically spans up to five months.
Fellow analyst Eric Balchunas remains optimistic, suggesting a mid-June launch is “certainly possible.” Balchunas bases his prediction on the SEC’s timeline for providing feedback on spot Bitcoin ETF applicants, which took approximately two weeks for a single round of comments.
The imp part is over. Now just logistics. My guess is there’s only one round of comments on the S-1s. And during btc one round took two weeks ish. So I this mid June is certainly poss. Just a guess tho. We will see.
— Eric Balchunas (@EricBalchunas) May 23, 2024
VanEck has already taken the lead by filing its amended S-1 shortly after receiving approval for its 19b-4 filing, while other applicants are expected to follow suit imminently.
This prompt action could potentially expedite the launch process for VanEck’s Ethereum ETF.
The launch of Ethereum ETFs is expected to generate significant investor interest, with analysts predicting inflows ranging from 10% to 20% of the net inflows witnessed by spot Bitcoin ETFs since their inception.
According to data from Farside Investors, spot Bitcoin ETFs have tallied $13.3 billion in net inflow over the past four and a half months.
If Ethereum ETFs capture 20% of that figure, they could potentially attract a combined $2.66 billion in inflows within the same timeframe.
Concerns have been raised about the potential impact on existing Ethereum investment products, particularly the Grayscale Ethereum Trust, which currently holds over $11.3 billion in assets.
Historically, the conversion of Grayscale’s Bitcoin Trust into an ETF form led to significant outflows, and some anticipate a similar trend with the Ethereum Trust as investors may opt for the newly launched ETFs.
While the approval process appears to be progressing smoothly, a potential challenge has been raised by Gabriel Shapiro, the general counsel for Delphi Labs.
Shapiro noted that the SEC’s approval was made by its Division of Trading and Markets unit on a “delegated authority,” which means that one of the five SEC Commissioners could theoretically challenge the decision within the next 10 days.
Digital asset lawyer Joe Carlasare dismissed this concern, stating that such a challenge is highly unlikely, as the SEC would not have delegated the decision-making authority without unanimous support from the Commissioners.
Seyffart echoed this sentiment, emphasizing that making decisions with delegated authority is standard practice for the SEC, as requiring an official vote for every decision would be impractical.
