SEC Officially Approves Ethereum Spot ETFs

The U.S. Securities and Exchange Commission (SEC) has announced the approval of all proposed Ethereum Spot ETFs, officially recognizing ETH as a "commodity" asset.

SEC Officially Approves Ethereum Spot ETFs

As predicted by experts, in the early hours of May 24, the U.S. Securities and Exchange Commission (SEC) officially approved 8 Ethereum Spot ETF proposals, marking a complete turnaround in just a few days.

Specifically, SEC approved the Ethereum Spot ETF proposals from Grayscale and Bitwise for trading on the NYSE; iShares (BlackRock) on Nasdaq; and VanEck, ARK/21 Shares, Invesco, Fidelity, and Franklin Templeton on the Cboe BZX stock exchange.

Proposed Ethereum ETFs awaiting SEC approval. Image: Bloomberg

However, Bloomberg's ETF analysts believe that the SEC has only approved these Ethereum ETF proposals based on the 19b-4 filing. According to procedure, ETF issuers must complete the S-1 filing to determine the start date of official trading.

In addition to approval, the SEC's announcement also recognizes Ethereum ETFs as commodity-based trading assets, indirectly dismissing the argument that ETH qualifies as a "security" which the Commission had previously threatened.

Ethereum becomes the second cryptocurrency to gain SEC approval for an ETF, following Bitcoin just four months earlier.

The news of SEC approving Ethereum ETFs had been hinted at by various parties, indicating all preparations were ready for this historic approval under Chairman Gary Gensler.

Cboe BZX stock exchange swiftly amended their 19b-4 filing for their Ethereum Spot ETF proposal as requested by the SEC - a standard form used to notify the SEC of changes to ETF proposals and necessary for approval.

VanEck's Ether spot ETF was also officially added to the list of ETFs on the Depository Trust and Clearing Corporation (DTCC) website. The list includes both active and pending ETFs.

Grayscale, Fidelity, Ark Invest removed ETH staking proposals to comply with the amended 19b-4 filing requirements. Chairman Gensler has long held the view that Proof-of-Stake projects exhibit characteristics of securities and has sought SEC oversight.

Similar to the first time with Bitcoin ETFs, the decision to approve Ethereum Spot ETFs involved continuous emotional ups and downs and drama within the cryptocurrency community. Investment analysis experts like Reuters, Bloomberg, VanEck, CoinShares... had previously predicted that SEC approval of registrations would be "very difficult" due to two reasons:

Firstly, SEC did not have constructive dialogue with the ETF initiators, in contrast to the previous Bitcoin spot ETF stage.

Secondly, Chairman SEC Gary Gensler's anti-ETH stance during the past few months has targeted many companies in the Ethereum ecosystem such as Uniswap and Consensys and remained vague about the security classification question.

However, within just one day on 05/21, the SEC suddenly reversed its position and demanded that the registration of Ethereum spot ETF approval supplement the 19b-4 file. On the same day, the SEC also required Nasdaq and CBOE exchanges to promptly update their listings for Ethereum spot ETF trading - a "reminder" of the SEC which usually only occurred before the preparation for the listing of new asset types on the stock exchange.

Following two consecutive requests within a day, Bloomberg's ETF analysts Eric Balchunas and James Seyffart raised the probability of Ethereum Spot ETFs being approved this week from a sudden leap to 75%. Even the "giant" UK bank Standard Chartered had to "reverse" its prediction that Ethereum Spot ETFs would not be approved in April.

Rumors suggest that the SEC quickly changed its course on Ethereum Spot ETFs due to "political motivations" related to the results of the presidential election in November. Accordingly, many sources affirmed that the Democratic Party of Joe Biden could secure the election against Republican heavyweight Donald Trump by approving SEC Ethereum Spot ETFs.

The price of Ethereum also surged recently, with hopes for approval of Ethereum Spot ETFs exceeding $3,900 USD. As the introduction of this new product will attract new capital flow into the crypto market, especially creating a "supply shock" for ETH, an estimated $15 - $45 billion USD inflow is expected in the first 12 months.

However, the second-largest cryptocurrency in the world, after the SEC announcement of approval of Ethereum Spot ETFs, has experienced severe adjustment fluctuations as a portion of investors have proceeded with "selling the news."

15m chart of ETH/USDT pair on Binance at 04:30 AM on 05/24/2024

In the last 12 hours, the cryptocurrency market has recorded more than $320 million USD in liquidated derivative orders, with 75% being long orders. In which, ETH accounted for the majority with $124 million USD burned, doubling the $66 million USD of BTC.

Derivative liquidation data, CoinGlass screenshot at 04:40 AM on 05/24/2024