On January 10, 2024, the U.S. Securities and Exchange Commission (SEC) approved 11 spot Bitcoin exchange-traded funds (ETFs), sparking hot discussion about whether spot Ethereum ETF would approved. Some traders have already started preparing for the arrival of the Ethereum ETF.

On May 23, the Securities and Exchange Commission finally gave the green light to the listing and trading of eight spot Ethereum ETFs after speculation that the regulator was considering treating ETH as a security.

So, what are Ethereum ETFs? What is the latest progress of the Spot Ethereum ETF?  Next, let’s take a close look at Ethereum ETFs from following aspects:

What are Ethereum ETFs?

Ethereum ETF VS. Bitcoin ETF

What is Spot Ethereum ETF?

What are the Benefits of  Spot Ethereum ETFs?

Latest News & Updates on Spot Ethereum ETF

What is the Influence of Spot Ethereum ETF Approval on ETC Price?

What is the Influence of Spot Ethereum ETF Approval on the Whole Market?

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 What are Ethereum ETFs?

An Ethereum ETF is a financial product designed to track the price of Ethereum, enabling investors to buy and sell shares on traditional stock exchanges. It is worth mentioning that Ethereum is the second largest cryptocurrency after Bitcoin (BTC) and the native token of the Ethereum blockchain.

Ethereum ETFs operate within the regulatory framework of traditional financial markets, providing investors with a regulated and secure channel to engage in cryptocurrency investments.  This regulatory oversight enhances investor confidence and ensures compliance with established financial standards.

Ethereum ETFs offer many benefits, like accessibility, regulatory oversight, ease of trading, and the ability to diversify investment portfolios. Trading on major stock exchanges, Ethereum ETFs provide liquidity and simplicity for investors who may be new to cryptocurrency markets.

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Ethereum ETF VS. Bitcoin ETF

Ethereum ETFs and the Bitcoin ETFs share several similarities. Both types of ETFs track the price of their respective cryptocurrencies through futures contracts, and they provide investors with convenient exposure to cryptocurrencies without having to hold digital assets directly. However, there are some key differences between the two types of ETFs.

Here’s a comparison of the Ethereum ETF and the Bitcoin ETF:

Benchmark asset: Ethereum ETFs track the price of Ethereum (ETH), while the Bitcoin ETFs track the price of Bitcoin (BTC).

Launch time: the first Ethereum ETF was launched on October 2, 2023, while BITO, the first Bitcoin ETF, debuted on October 19, 2021.

Trading volume: Since the Ethereum ETFs are relatively new to the market, its trading volume is low compared to the larger Bitcoin ETFs.

Fees: fees for both types of crypto ETFs are relatively high, as the expense ratios for both are typically around 0.65% to 0.95%.

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What is Spot Ethereum ETF?

A spot Ethereum ETF is an ETF that tracks the spot price of Ethereum, which could make it easier for investors to invest in Ethereum and also help further legitimize Ethereum as a recognized asset.

In addition, the existing ETH futures ETF makes understanding the investment product more complicated by tracking futures. They track the price of Ethereum futures contracts, instead of the price of Ethereum itself.

There are many potential benefits to investing in Ethereum through spot ETF products, including:

Expanding investment base: Ethereum ETFs may make it easier for investors, especially those unfamiliar with cryptocurrencies and futures contracts, to invest in Ethereum.

Reducing volatility: Ethereum is a volatile asset, but an Ethereum ETF can help reduce volatility by pooling investor funds and investing in a basket of Ethereum futures contracts.

Increasing liquidity: Ethereum ETFs help increase liquidity in the Ethereum market, making it easier for investors to buy and sell Ethereum.

Institutional adoption: Ethereum ETFs help attract institutional investors to invest in Ethereum, resulting in increased demand and higher prices.

At present, SEC has approved the spot Ethereum ETF. While all investors should noted that the approval doesn’t mean the instant trading are available for these ETFs, as the SEC will still need to review individual applications from asset managers for each of the eight ETFs that were given initial approval Thursday. It may takes several weeks for that process.

What are the Benefits of Spot Ethereum ETFs?

Just like spot Bitcoin ETFs, Ethereum ETFs will provide many revolutionary benefits.

Access to ETH: for those traders who are unwilling to trade volatile cryptocurrencies through crypto exchange, they can now get exposure to Ethereum through their existing brokerage accounts. With existing brokerage account, investors are capable of buying and selling them like stocks without the need for cryptocurrency wallets or complicated exchange tracking.

Increased Legitimacy: under the current regulatory framework, whether it is legit to trading cryptocurrency vary from country to country. While having an Ethereum ETF listed only on major exchanges will give the cryptocurrency industry as a whole more legitimacy and recognition while bridging the divide between traditional finance and the rapidly expanding realm of digital assets.

Increased Liquidity: if more institutional and general investors engage in ETH trading through ETFs, Ethereum’s liquidity can increase significantly. Everyone will benefit from smoother, less volatile trading as a result, including large funds and small traders.

Reduced security risks: by avoiding the need for individual cryptocurrency wallets, investors reduce exposure to hacking attacks and security issues related to digital assets. Additionally, ETFs are governed by regulations, which provide a degree of security and transparency not necessarily found in the Bitcoin market.

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Latest News & Updates on Spot Ethereum ETF

In the early hours of May 21, Bloomberg analysts Eric Balchunas and James Seyffart increased their odds of spot Ether ETF approval to 75% (up from 25%). Following the news, the Ethereum cryptocurrency Ether (ETH) experienced a sharp price rally and briefly hit a high of $3,691.

On May 23, the SEC approved the 19b-4 filings from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise — approving the rule changes allowing spot Ether ETFs to be listed and traded on their respective exchanges.

What is the Influence of Spot Ethereum ETF Approval on ETC Price?

The approval of the Spot Ethereum ETF is expected to have a positive impact on Ethereum prices. This is because this ETF will create a simpler mechanism for investors to gain exposure to Ethereum. We could see new investors opening Ethereum positions through the Spot Ethereum ETF.

Ethereum may rally more than 75% if an exchange traded fund investing directly in the crypto is approved, according to AllianceBernstein.

“Given the sustained demand inflow seen by Bitcoin, leading to 75% rally since the ETF approval, we would expect similar price action for ETH,” analysts at AllianceBernstein led by Gautam Chhugani wrote in a Tuesday note.

Ethereum jumped 7.6% on May 21 to around $3,772, with a 65.6% year-to-date gain, according to Dow Jones Market Data. On the same day, Bitcoin (BTCUSD) edged up 0.7% to $70,570, up 68.8% so far this year.

As reported, Singapore-based QCP Capital believes the approval of spot Ethereum ETFs in the United States could potentially trigger a substantial rally of up to 60% in the price of ETH.

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What is the Influence of Spot Ethereum ETF Approval on the Whole Market?

This approval undoubtedly represents a big victory for the crypto industry, which has been hoping for the approval of spot Ether ETFs since a similar product for Bitcoin was approved at the beginning of 2024. What is the impact on the market after Ethereum ETF getting approval. Let’s discuss them in detail.

Implications for Blockchain Innovation and DeFi: the adoption of Ethereum spot ETFs is expected to reverberate throughout the decentralized finance (DeFi) industry. DeFi systems, which primarily use the Ethereum blockchain, can become more liquid and stable as a result of increased institutional investment in Ethereum. Additionally, as developers gain confidence in the long-term stability of the network, this development could inspire creativity in Ethereum-based projects.

Competitive Landscape: Ethereum is in a better position than other blockchain networks because of its better status as a regulated investment instrument. Ethereum’s maturity and dependability has been highlighted by the introduction of spot ETFs, which can lure developers and investors away from rival platforms. To maintain its competitive edge, Ethereum must now face scalability and performance challenges while continuing to evolve.

Investor Sentiment: the SEC’s acceptance of spot Ethereum ETFs has greatly improved investor sentiment. A significant rise in prices over the past week indicates this optimistic outlook. Institutional interest and clear regulations are expected to sustain this optimistic outlook by encouraging additional investment and ecosystem development in Ethereum.

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