Spot Ethereum ETFs: An Imminent Reality

Newly-approved spot Ethereum exchange-traded funds (ETFs) could hit the market by mid-June.

Following the successful 19b-4 filings for spot Ether ETFs, which allow them to be listed on exchanges, the next step is to obtain approved S-1 registration statements before trading can commence.

Bloomberg ETF analyst James Seyffart predicts that the S-1 approvals could be granted in a 'couple of weeks.

However, he acknowledges that the process may take longer, typically up to five months. Fellow Bloomberg ETF analyst Eric Balchunas believes a mid-June launch is possible.

Balchunas expects a single round of comments to the S-1 amendments, similar to the feedback provided for spot Bitcoin ETF applicants, which could facilitate a quicker approval timeline.

VanEck Leads the Charge

One of the applicants, VanEck, wasted no time and filed its amended S-1 shortly after receiving approval for the 19b-4 filings. Other applicants are anticipated to follow suit soon.

However, Gabriel Shapiro, general counsel at Delphi Labs, points out that its Division of Trading and Markets unit granted the SEC's approval under delegated authority. He suggests that one of the five SEC Commissioners could challenge the decision within the next ten days.

Nevertheless, digital asset lawyer Joe Carlasare believes that such a challenge is unlikely, stating that passing it through the trading and markets division indicates no opposition from the Commissioners.

Market Expectations and Potential Impact

Regarding market expectations, Seyffart predicts that spot Ether ETFs could attract approximately 20% of the flows that spot Bitcoin ETFs have seen.

On the other hand, Balchunas offers a more conservative estimate of 10-15%. According to Farside Investors, since the launch of spot Bitcoin ETFs approximately four and a half months ago, they have accumulated $13.3 billion in net inflows.

"Even capturing 20% of that figure would result in spot Ether ETFs amassing a combined $2.66 billion in inflows over a similar timeframe."

However, concerns have arisen around potential outflows from the Grayscale Ethereum Trust if investors shift their holdings to spot Ether ETFs, mirroring the outflows witnessed with the conversion of Grayscale's Bitcoin investment product.

As reported by Arkham Intelligence, the Grayscale Ethereum Trust currently holds over $11.3 billion in assets.

Regulatory Approval and Market Speculations

Eight applicants, including VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Bitwise, and Invesco Galaxy, were granted regulatory approval on May 23. One ETF issuer, Hashdex, did not receive approval on that particular day, standing as the exception.

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

QCP Capital pointed out that when spot Bitcoin ETFs were approved in January, Bitcoin experienced a significant surge from $42,000 to over $73,000 within two weeks after the ETFs began trading.

"With Friday implied volatility above 100%, the market is expecting fireworks," QCP Capital stated.