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After Bitcoin Spot ETFs, Ethereum Spot ETFs arrive on Wall Street

Tuesday, July 23, 2024

Late on Monday, the US Securities and Exchange Commission (SEC) validated the final S-1 forms required. Trading in these new products began this Tuesday.

2024 is clearly the year cryptos arrive on Wall Street. Six months after the first Bitcoin Spot ETFs were validated, the US securities regulator (SEC) on Monday evening gave the go-ahead for the first Ethereum Spot ETFs.

A total of 9 Ethereum Spot ETFs that have been validated, including one from BlackRock (iShares Ethereum Trust) and Fidelity (Fidelity Ethereum Fund), which are already the leaders in Bitcoin Spot ETFs.

The trading of the first Ethereum Spot ETFs began this Tuesday in the United States, and the results are quite excellent as volumes have already exceeded 500 million dollars in just a few hours.

Ether accessible for all Americans

With the arrival of these Ethereum Spot ETFs, all US investors will be able to invest in ether via their securities account with their usual broker without going through Exchanges and other crypto brokers.

European investors already have similar products, known as ETNs or ETPs, issued in particular by managers such as VanEck, CoinShares and 21Shares. However, the arrival of equivalents in the US is much more significant for the sector because of the weight of the US capital market.

According to analysts, there could be between $5 billion and $20 billion invested in these products over the next 12 months. By way of comparison, there has already been more than $25 billion invested in Bitcoin Spot ETFs in the first six months of the year.

A case off to a bad start‍

If the validation of these files generates so many comments, it is because it was not a given. At the beginning of the year, Gary Gensler and his teams had made it known that there would be very little chance that such products would be validated, notably because ether was considered as “a traditional financial security,” which many actors in the sector have contested for years.

In an interview with The Big Whale in March, Cathie Wood had explained that the SEC would not accept Ethereum Spot ETFs “as long as they were based on staking.”

Things have finally evolved, notably thanks to a more favorable political climate, with the crypto electorate being identified as a target by both the Democratic and Republican camps in the race to the White House.

The SEC, under pressure from all sides, finally changed its position in mid-May by finally showing signs of cooperation on Ethereum ETF files, after months of stalemate.

Moreover, the American agency implicitly acknowledged that ether was not a “traditional financial security” by abandoning its investigation into the Ethereum ecosystem last month, at the heart of which was the giant ConsenSys.

By default, therefore, ether is now considered a “commodity” like bitcoin, and thus regulated by the Commodity Futures Trading Commission (CFTC), which is much more “crypto-friendly”.

Solana or Ripple coming soon?

Now that the Ethereum Spot ETFs have been validated, the question is which blockchain will have its Spot ETF next. While no protocol is the clear favourite, it would seem that the Solana Spot ETF is the next hot topic to follow.

The challenge for issuers of future Solana Spot ETFs or others will be to demonstrate that these cryptocurrencies are commodities - sufficiently decentralised - and that they are not subject to price manipulation, a crucial element in the eyes of the SEC. And that's where a lot of projects are likely to get stuck...

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This analysis is not investment advice. It has been prepared without taking into account your personal situation, particularly your financial situation, risk profile, and investment objectives.

Before investing in any product, investors should fully understand the risks involved and consult their own legal, tax, financial, and accounting advisors.

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