Ethereum investors have been waiting for the approval of the ETH-backed exchange-traded funds for a long time, with their expectations only becoming more intense in the wake of the Bitcoin ETF approval of January 10th. Although it took a little longer than initially anticipated, traders can now breathe a sigh of relief as the SEC has allowed the creation of Ether exchange-traded funds. But what does this mean for the trading community, the price action and how to buy crypto currency overall? Should investors change their strategies going forward, and does this mean that the values will receive a sudden boost?
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SEC decision
On May 23rd, the Securities and Exchange Commission officially approved a rule change that could change things for Ethereum, and more specifically for the exchange-traded funds based on Ether. The decision arrived less than six months after the SEC approved Bitcoin ETFs, an asset class that received a very warm welcome from the trading community and which elevated the prices to new all-time highs. Ethereum investors are now looking for the latest approval to have a similar impact on ETH and take the values further, a much-needed change given the slump and stagnation affecting the marketplace over the past months.
Spot Ether exchange-traded funds began trading in July 2024. This introduction of this much-anticipated asset class has been designated as one of the most important shifts in the way the marketplace operates, by giving traders the opportunity to complete transactions through the means of a more regulated environment. ETFs provide better accessibility and simplicity, a good thing for those who may feel like the blockchain is too complex and convoluted, or who don’t have the time to delve into all of its intricacies before they begin investing. Unlike the exchange-traded funds that are based on futures, the spot ETFs hold Ethereum tokens directly, and are much more cost-effective.
The Ethereum ETFs can be included in retirement account portfolios, another benefit they offer compared to standard cryptocurrencies that are more problematic in this regard and are typically not allowed in qualified savings plans. However, it’s essential for investors to take risk considerations into account nonetheless, remain informed about market developments and evaluate their options carefully in order to avoid the worst effects of fluctuations and volatility.
Price action
ETF approvals have been associated with steep price increases in the crypto community, due to the assets’ ability to attract a large number of investors, potentially from the institutional sector as well, who may have still been on the fence about whether to invest or not in the first place. This elevates engagement rates and brings more capital to the ecosystem. After the BTC ETF approval that took place in January, digital gold recorded an immediate price spike that took its values higher than ever before. However, the same thing didn’t help in Ethereum’s case, and the coin has yet to achieve a major breakthrough.
Among the factors are the macroeconomic aspects such as inflation and changes in the manufacturing sector. A weakening of major fiat currencies such as the US dollar could bring a more solid price increase, but in the meantime things are likely to continue stagnating. Most investors and market analysts consider that a climb to $6,000 is the most likely change that will occur as a result of the ETFs, so a rally will definitely begin.
Ethereum isn’t expected to surpass Bitcoin in this regard either, and even a full approval would be unlikely to steal BTC’s spotlight. Although Ethereum will definitely exhibit much more robust performance in the future, Bitcoin’s status as digital gold is difficult to challenge, while the hefty market capitalization level also gives it a considerable advantage. There’s also the fact that the two fulfill entirely different purposes for investors. Despite the fact that both are cryptocurrencies and both operate on the blockchain, there are some key differences between Bitcoin and Ethereum.
The former has gained a reputation as a long-term store of value owing to its ability to maintain relatively stable levels over an extended period of time. Ethereum, on the other hand, is seen more like an investment in the tech sector, more specifically in early-stage technologies. The blockchain has been responsible for the launch and propagation of decentralized applications and financial projects, as well as the emergence of non-fungible tokens, which ended up serving as an inspiration for the Bitcoin Ordinals several years later. This asset class can tokenize not just fellow digital assets but also real-life holdings, including real estate, securities, and art.
Rally
Apart from the fact that the ETFs haven’t been launched yet, there’s still lingering uncertainty about their status. There’s an additional factor that might have influenced Ethereum’s general price action, which kept the levels relatively low. Grayscale’s announcement of the plans to convert its Ethereum trust into a spot ETF could result in massive outflows. The same situation occurred back in January with Bitcoin. According to analysts, the figures could amount to over $10 billion when the time arrives. So far, Bitcoin has shed well over $17 billion in assets.
Adding to that is the fact that no new addition shows results so soon. According to recent data, it took approximately thirty days for Bitcoin’s price to spike 30%. In the immediate aftermath of the approval, the price actually dropped 15% to the traders’ disappointment. A similar situation might occur in the case of Ethereum, so there’s no cause for pessimism.
Undervalued
Most analysts and researchers agree that Ethereum is incredibly undervalued at the moment, and they believe that this trend will change after ETFs are approved for good. It seems that upgrades and the Bitcoin halving were not enough to bring back the momentum, or at least not enough to record considerable growth. There’s also the fact that there has been a decline in ETH-leveraged positions since the beginning of the year. The lack of regulatory clarity and uncertainty regarding the asset’s future have also weighed Ethereum down and caused a lag in price action.
The FIT21 crypto bill is the Financial Innovation and Technology for the 21st Century Act, and many consider it a hallmark in cryptocurrencies’ regulatory clarity. The purpose of the act is to clarify the roles of the Securities and Exchange Commission and the Commodity Futures Trading Commission, as well as allow for further innovation in the world of digital assets so that cyber coins can reach their full potential and investors can benefit from their transactions even more. On May 22nd, it passed the US House of Representatives, being headed to the Senate, a place where it was met with fierce opposition by several senators.
FIT2 would give the Commodity Futures Trading Commission primary control over crypto, with the aim being to work with regulators that would be more lenient than the SEC. As of October, the bill was still stalling, with House Majority Tom Emmer believing that it could become law by Christmas. However, as of November 6th, there had been no progress on the FIT21 bill. That may not be as bad as it sounds since the recent presidential elections have created the conditions for a stronger marketplace and better circumstances for crypto that are potentially much more beneficial than anything FIT21 could have offered.
If you’re an investor, remember to stick to your strategy and avoid rushing into any decision. Although excitement levels are high during this time, the potential for volatility means remaining calm and patient when trading is even more critical than usual.