Ethereum Investors Receive Positive Update, Boosting Sentiment
Investors in Bitcoin (BTC) may remember a significant event from last January when the first exchange-traded funds (ETFs) based on spot Bitcoin prices made their debut. This moment had been years in the making.
The journey towards Bitcoin ETFs began when the Winklevoss twins, known for their involvement in Facebook, submitted the initial application for a spot Bitcoin ETF back in 2013. Although the Securities and Exchange Commission (SEC) rejected this application five years later, the concept of spot Bitcoin ETFs persisted. Eventually, in 2021, the SEC succumbed to investor pressure and a wave of ETF applications, approving the first funds based on Bitcoin futures. Subsequently, on January 10, 2024, proper spot-price ETFs were introduced.
On that day, 11 cryptocurrency ETFs entered the market, including the iShares Bitcoin Trust (IBIT) and the Grayscale Bitcoin Trust (GBTC), which had been converted from a mutual fund. These ETFs have collectively seen gains of around 40%, outperforming the S&P 500 index by a significant margin. Renowned growth investor Cathie Wood anticipates that these funds will attract numerous institutional investors to the crypto market, potentially driving Bitcoin prices to new heights in the future.
Now, attention has shifted to Ethereum (ETH), with the recent approval of spot Ethereum ETFs by the SEC. These ETFs are expected to have a comparable long-term impact on the second-largest cryptocurrency.
The path to Ethereum ETFs mirrors that of Bitcoin, with Grayscale exploring an Ethereum ETF in 2017 and launching the Grayscale Ethereum Trust (ETHE) as a mutual fund in 2019. Following the introduction of futures-based funds, applications for spot-priced Ethereum ETFs surged last fall. In May, the SEC’s decision to allow exchanges to trade ETFs based on Ethereum as a commodity marked a significant milestone, leading to the approval of nine spot Ethereum ETFs.
Among these, the iShares Ethereum Trust ETF (ETHA) stands out due to the iShares brand’s reputation and the support of financial giant BlackRock. Various providers are offering fee discounts to attract early investors to these ETFs.
The launch of Ethereum ETFs coincided with a turbulent market week, impacting both traditional and crypto markets. Despite the initial market volatility, history suggests that ETFs can stabilize over time, as seen with Bitcoin ETFs in January.
As these new investment vehicles gain traction, they offer a more secure and regulated means for investors to participate in the crypto market, potentially attracting a broader range of investors and positively impacting the long-term value of Ethereum.
