What’s the Ethereum Price Prediction After SEC Approves Spot Ether ETFs?

2024/05/24 10:43:37

On May 23, 2024, the US Securities and Exchange Commission surprised global financial markets by approving eight spot Ethereum ETFs, months after approving spot Bitcoin ETFs in the US market. On May 23, the SEC gave the green light to 194-b filings from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise, allowing these investment products to be listed and traded on leading regulated exchanges.

Spot Ether ETFs could launch as early as mid-June if the SEC follows a similar timeline to the spot Bitcoin ETF process. The S-1 approval typically takes up to five months, but Bloomberg ETF analyst Eric Balchunas estimates mid-June is possible, anticipating only one round of comments to the S-1 amendments.

The Significance of US SEC’s Approval of Spot Ethereum ETFs

The approval of a spot Ethereum ETF signifies regulatory acceptance and integration of cryptocurrencies into the mainstream financial system. This move could enhance confidence in cryptocurrencies, drive innovation, and spur the development of new financial products. It could also lead to increased adoption and a significant influx of institutional investment, further legitimizing Ethereum as a valuable asset.

The spot Ether ETF approval by the US SEC is even more surprising and significant a milestone for crypto enthusiasts worldwide as the agency remains locked with Ethereum over its status as a security. Bloomberg ETF analyst James Seyffart mentions that by approving Ether trusts, the SEC is explicitly acknowledging Ether as a commodity.

Should the S-1s be signed off, experts predict significant inflows into spot Ether ETFs. Seyffart expects these ETFs will see 20% of the flows that spot Bitcoin ETFs have seen, while Balchunas estimates a smaller range of 10-15%. Spot Bitcoin ETFs have garnered $13.3 billion in net inflows since their launch, indicating that spot Ether ETFs could attract substantial investment, potentially around $2.66 billion in the same timeframe.

Learn more about what an Ethereum ETF is and how it works.

An Overview of the 8 Spot ETH ETFs Approved by the SEC

Several major financial institutions have applied for spot Ethereum ETFs, including BlackRock, VanEck, ARK 21Shares, Fidelity, Invesco, and Grayscale. The SEC's decision deadlines for these applications range from May to August 2024. Here’s a brief overview of the 8 spot Ethereum ETFs the SEC approved on May 23:

BlackRock Ethereum Trust: Managed by BlackRock, this ETF aims to provide direct exposure to Ethereum, leveraging BlackRock's extensive experience in managing various financial products. The ETF's approval marks a significant step in bringing institutional investment into the Ethereum market.
VanEck Ethereum Trust: VanEck’s ETF is designed to offer investors exposure to the daily price movements of Ethereum. This ETF benefits from VanEck’s reputation for pioneering investment solutions and is expected to attract substantial interest from institutional investors.
ARK 21Shares Ethereum ETF: This ETF is a collaboration between ARK Invest and 21Shares, combining ARK's innovative investment strategies with 21Shares’ expertise in cryptocurrency products. The fund is positioned to capitalize on the increasing adoption of Ethereum.
Fidelity Ethereum Trust: Fidelity’s entry into the Ethereum ETF space underscores its commitment to offering diverse investment products. This ETF provides a regulated way for investors to gain exposure to Ethereum’s price movements, further cementing Fidelity's role in the crypto investment landscape.
Invesco Galaxy Ethereum ETF: This ETF is a joint effort between Invesco and Galaxy Digital, aiming to merge traditional financial strategies with digital asset expertise. The product is expected to enhance the accessibility of Ethereum investments for a broader audience.
Grayscale Ethereum Trust: Grayscale’s trust is one of the more well-known products in the market, having previously been available as a trust. The conversion to an ETF is anticipated to increase liquidity and investor interest, building on Grayscale's established presence in the crypto market.
Franklin Templeton Ethereum ETF: Franklin Templeton’s ETF aims to provide institutional and retail investors with a secure and regulated way to invest in Ethereum. The approval of this ETF highlights Franklin Templeton's commitment to innovation and diversification in investment products.
Bitwise Ethereum ETF: Bitwise’s ETF focuses on offering transparent and secure exposure to Ethereum, backed by Bitwise’s comprehensive research and investment methodologies. The product is designed to appeal to both retail and institutional investors seeking regulated Ethereum exposure.

These ETFs collectively represent a significant milestone for Ethereum, enhancing its accessibility and legitimacy within traditional financial markets. Analysts believe the approval of these ETFs could bring up to $45 billion in inflows within the first year, potentially driving Ethereum's price significantly higher.

Ethereum Price Trajectory in 2024

In 2024, the ETH/BTC ratio has experienced significant fluctuations, reflecting the dynamic interplay between Ethereum and Bitcoin. At the start of the year, the ETH/BTC ratio saw a substantial rise, increasing by 19% to 0.06 in the first three weeks, driven by anticipation of Ethereum upgrades and the potential approval of spot Ether ETFs. This early surge indicated strong investor confidence in Ethereum's prospects compared to Bitcoin.

However, by April 2024, the ETH/BTC ratio had dipped to around 0.046, a level not seen since April 2021. This decline highlighted Ethereum's struggle to maintain its position against Bitcoin, which has shown robust performance. Market analysts attribute this underperformance to several factors, including increased market volatility and differing investor sentiment toward Bitcoin and Ethereum.

After a month of stagnation, ETH/BTC broke above 0.050 over rising expectations of spot ETH ETF approval earlier this week. Analysts suggest that upcoming developments, such as Ethereum 2.0 and the launch of the spot Ethereum ETFs, could catalyze a reversal in the ETH/BTC ratio, potentially pushing it higher. Some traders are watching key resistance levels, such as 0.06117, which, if breached, could signal a bullish phase for Ethereum relative to Bitcoin.

YTD ETH/BTC price volatility | Source: KuCoin’s ETH/BTC price chart, TradingView

Since the news of potential approvals for spot Ethereum ETFs broke out, Ethereum's price has surged over 24% in the past week alone. This spike has been accompanied by a significant increase in trading volume, which nearly doubled to $47.45 billion in 24 hours. Ethereum's market capitalization now stands at over $442 billion, reinforcing its position as the second-largest cryptocurrency by market cap. These gains highlight the market's anticipation of regulatory approval for spot Ethereum ETFs and the ongoing developments within the Ethereum ecosystem.

ETH Price Prediction by Experts

Experts have varying predictions for Ethereum's price following the approval of spot ETFs:

Analysts from Standard Chartered predict that this approval could lead to up to $45 billion in inflows within the first 12 months. This substantial increase in investment is expected to push Ethereum's price to $8,000 by the end of 2024. The optimism around this approval is driven by the precedent set by the approval of spot Bitcoin ETFs, which led to a notable surge in Bitcoin's price.
Bernstein analysts highlighted the potential for Ethereum (ETH) prices to surge 75% akin to Bitcoin's growth following the ETF approval.
QCP Capital forecasts that Ether ETFs could trigger a 60% rally in the value of Ether, similar to the market reaction seen after Bitcoin ETF approvals.
Raoul Pal, a renowned crypto trader, expects Ethereum to surge to $17,000-$20,000 during the next bull cycle.
Smiley, a leading crypto analyst, expects Ethereum to trade between $7,000 and $8,000 in 2024 if the ETFs are approved.
Austin Arnold from Altcoin Daily offers a more long-term forecast, suggesting Ethereum could reach $10,000 at the peak of the current bull cycle. The approval of these ETFs is likely to enhance Ethereum’s legitimacy, attract significant institutional investment, and improve liquidity, all contributing to a potential price increase.
Based on the analysis by the crypto analyst Yoddha, Ethereum is predicted to experience a major rally and surpass $10,000 by the end of the year. This forecast is based on historical trends in Ethereum's price action, highlighting periods of accumulation, interim peaks, and volatility from 2016 to 2024.

Spot Ethereum ETFs vs. Spot Bitcoin ETFs

Spot Ethereum ETFs and Spot Bitcoin ETFs offer similar benefits but differ in key aspects due to the nature of the underlying assets.

Underlying Assets: Spot Bitcoin ETFs hold actual Bitcoin, providing direct exposure to Bitcoin's price movements. Spot Ethereum ETFs, similarly, hold Ethereum, allowing investors to track its price without directly owning the cryptocurrency. This direct ownership means the ETF's price closely follows the market price of the underlying asset.
Market Impact: Bitcoin, being the first cryptocurrency and having the first approved spot ETF, enjoys a more established presence in the market. Ethereum ETFs are newer but bring unique benefits due to Ethereum's diverse use cases in smart contracts and decentralized applications (dApps). This broader utility could drive more significant interest and growth in Ethereum ETFs than in Bitcoin ETFs.
Regulatory and Trading Differences: Both types of ETFs adhere to traditional trading hours and regulatory standards, offering a familiar environment for conventional investors. However, Ethereum ETFs might face additional regulatory scrutiny due to the complexities associated with Ethereum's network and staking features.
Potential Returns and Risks: Spot Ethereum ETFs could offer dividend potential from staking rewards, which is not a feature of Bitcoin ETFs. However, this depends on the ETF's structure and regulatory constraints. Both ETFs are subject to market volatility, regulatory risks, and management fees, but Ethereum's unique capabilities and potential for future growth could make its ETFs attractive for long-term investors.
Liquidity and Accessibility: The approval of spot ETFs for both Bitcoin and Ethereum is expected to enhance market liquidity and accessibility, making it easier for institutional and retail investors to participate in the crypto market without directly managing the assets. This increased liquidity can lead to more stable prices and reduced volatility.

In summary, while both Spot Ethereum and Spot Bitcoin ETFs offer regulated and accessible investment options, their differences lie in the underlying assets and their unique features and risks. Ethereum's broader utility and potential for staking rewards might make its ETFs a compelling choice for diversified portfolios.

Here’s a deep dive into Bitcoin ETFs and how they work.

Potential Hurdles of Inflows Into Spot Ether ETFs

The introduction of ETFs could increase market volatility, especially if large institutional investors enter the market. Historically, significant inflows following ETF approvals have led to price surges and subsequent volatility. However, despite the approval of spot Ethereum ETFs, large inflow into ETH spot ETFs is not without challenges:

Regulatory Uncertainty: The SEC's stance on Ethereum's regulatory status as a security or commodity is unclear, which could affect the approval process. Although the SEC approved the 19b-4 filings, allowing these ETFs to be listed, they also require approved S-1 registration statements to begin trading. This dual-layer approval process introduces additional regulatory scrutiny and potential delays.
Market Stability: According to Bloomberg ETF analyst James Seyffart, S-1 approvals could take a few weeks to a few months, further extending the timeline and potentially influencing market stability during this period.
Technological Risks: Issues related to staking and security could pose challenges for ETFs, requiring careful management and regulation. The approval process also involves potential risks of legal challenges. While VanEck and others have filed their amended S-1s following their 19b-4 approvals, there remains a risk that one of the SEC Commissioners could challenge the decision within the next 10 days. This procedural complexity could introduce further delays and uncertainties.

Impact of Ethereum 2.0 on Spot Ethereum ETFs

The approval of spot Ethereum ETFs by the US SEC, combined with the Ethereum 2.0 upgrades, is poised to significantly impact the Ethereum market. The Ethereum 2.0 upgrades, including the Dencun upgrade, enhance scalability and transaction efficiency by introducing proto-danksharding. This reduces transaction costs and increases network throughput, making Ethereum a more robust and attractive investment. As the network becomes more efficient, the increased activity can lead to higher liquidity and reduced volatility for spot Ethereum ETFs, benefiting both retail and institutional investors.

The shift to Ethereum 2.0's proof-of-stake consensus mechanism allows ETH holders to earn staking rewards. However, due to regulatory pressures from the US SEC, high-profile issuers like Ark Investments Management and Fidelity Investments have removed staking from their ETF plans. This move aims to improve the chances of ETF approval but may reduce the appeal compared to direct Ether purchases. Staking is crucial for many investors as it offers additional income, and its exclusion could impact the attractiveness of Ethereum ETFs. Despite this, the enhanced security, scalability, and liquidity brought by Ethereum 2.0 upgrades will continue to drive interest in these ETFs.

Closing Thoughts

The SEC’s approval of spot Ethereum ETFs could be a game-changer for the crypto market, pushing Solana and XRP as next in line for potential ETFs and approvals. However, you should carefully consider potential regulatory, market, and technological challenges. The dual-layer approval process involving both 19b-4 and S-1 filings adds a layer of complexity and potential delays. Nonetheless, the anticipated inflows could significantly boost Ethereum's price, further legitimizing its role in the financial ecosystem.