Recently, the wind direction of the Ethereum spot ETF has changed dramatically, causing high attention from the market and regulatory levels. Based on the optimistic sentiment of the approval of the Ethereum spot ETF in the United States, the price of Ethereum has risen sharply this week, and the current price is $3807.
Although the reasons behind the sudden change in direction are still controversial, market observers and senior cryptocurrency practitioners generally believe that regulatory approval will have different degrees of impact on Ethereum and other cryptocurrencies.
It is reported that the asset management company VanEck is the first brokerage firm to submit an application for the Ethereum spot ETF to the U.S. Securities and Exchange Commission (SEC). The results of the 19b-4 document application will be available around 4 a.m. on May 24th, Beijing time. Let’s take a look at the views of 7 senior industry insiders on this matter and its subsequent impact.
Digital asset management company: Galaxy Digital
Mike Novogratz, CEO of Galaxy Digital, stated in an interview with CNBC that the “broad” reversal in Washington over the past 24 hours has overturned the Ethereum spot ETF game. He believes that if the change by the U.S. Securities and Exchange Commission is politically motivated, then “this will be a huge shift.” “If that’s the case, the prices (of the cryptocurrency market) will be much higher.”
In addition, he also stated that with Trump leading Biden in the polls, the cryptocurrency super PAC has raised over $1.5 billion to support industry candidates, and the Democrats’ aversion to cryptocurrencies is increasingly untenable. “In fact, Massachusetts Senator Elizabeth Warren and a small group of Democrats are tying the Democrats to this,” said Novogratz. He added, “There is no reason to turn this technology into a complete political issue.”
Ethereum core institution: Consensys
Joseph Lubin, co-founder of Ethereum and founder of the cryptocurrency infrastructure company Consensys, stated that Ethereum is expected to experience “massive demand,” which could lead to supply shortages and push up its price. Lubin told the media that institutions that have already dealt with Bitcoin ETFs “will likely want to diversify into the second approved ETF.” He said, “Purchasing Ethereum through an ETF will produce quite a bit of natural, pent-up pressure.” He added that compared to when the spot Bitcoin ETF was approved in January, the supply to meet this demand will be reduced.
As for Bitcoin, authorized participants (i.e. companies that sign contracts to purchase Bitcoin on behalf of the ETF when new shares are created each day) can simply purchase idle Bitcoin on exchanges or through OTC trading partners. However, on-chain data shows that over 27% of Ethereum has already been staked, meaning it is locked in contracts and earns returns for its owners. “Most of Ethereum is used in core protocols, DeFi systems, or DAOs (decentralized autonomous organizations),” Lubin pointed out. In other words, Ethereum not only has a lower market value than Bitcoin – which makes its price more sensitive to fund inflows – but much of its supply cannot be used for spot ETF trading.
Funds management giant: Bitwise
Matt Hougan, Chief Investment Officer of Bitwise, wrote in a blog post this week, “Cryptocurrencies are becoming mainstream, and this development will push cryptocurrencies to record highs.” However, Hougan stated that the catalyst is not the sudden optimism for the Ethereum spot ETF. “Something big happened in Washington: a bipartisan group of senators and representatives passed the first legislation in Washington’s history supporting cryptocurrencies.” He mentioned the bill to repeal SEC SAB 121, which imposed strict regulations on cryptocurrency custody.
“Whether or not we get approval for the Ethereum spot ETF, the latest support for cryptocurrencies in Washington, D.C. is obvious,” Hougan added.
Blockchain infrastructure platform: Swarm
Timo Lehes, co-founder of the blockchain infrastructure platform Swarm, believes that once the Ethereum spot ETF is approved, “capital will flow in large quantities” to Ethereum. “Once you’ve allocated Bitcoin, you’ll look for something else as part of a diversified investment portfolio,” he told the media. “Investors will naturally choose ETH as an important position for the next cryptocurrency asset. Although the inflow of funds may be relatively small compared to the Bitcoin spot ETF launched in January, it is still enough to change its price trend.”
Data analysis platform: Kaiko
Analyst Adam McCarthy of the data analysis platform Kaiko said that options traders swarming around bullish options are now seeking higher returns, but investors should exercise caution. “The demand for the Ethereum spot ETF in Hong Kong is not large and has experienced several days of net outflows. The lack of staking channels for the Ethereum spot ETF is also an important factor and may further affect demand,” he advised.
He suggested paying attention to the grayscale value of the $9 billion ETHE product, “If it starts to see significant outflows, it will have a significant impact on the price of Ethereum.”
Analysis and research company: Bernstein
According to analysts Gautam Chhugani and Mahika Sapra of the analysis and research company Bernstein (which has total assets of $725 billion), the approval of the Ethereum spot ETF is expected to drive the price of Ethereum to soar by about 75%, reaching as high as $6600.
They pointed out that the SEC approved a similar Bitcoin spot ETF product in January, and three months later, this event stimulated a rise in the price of Bitcoin by about 75%, reaching a historical high of $73,000.
Chhugani and Sapra stated in a report this week, “We expect the price trend of ETH to be similar.”
It is worth mentioning that in November 2021, Ethereum set a historical high of $4878. If it really reaches $6600, the price of Ethereum will once again break through the historical high.