ETFs based on Bitcoin futures contracts were approved by the SEC in late 2017: now it seems to be the turn of those based on Ethereum futures as well, according to the latest news.
Bloomberg reports this, citing anonymous sources familiar with the situation.Â
Summary
News: ETFs on Ethereum and SEC approval
Just as was the case with Bitcoin, these ETFs would not be collateralized directly in ETH, but in futures contracts on the price of ETH.
Indeed, to be honest, it seems a bit strange that almost five years after the approval of Bitcoin futures ETFs, those on Ethereum futures have not yet been approved.Â
The thing is, with regard to Ethereum, the approval path for these ETFs has been more troubled, because apparently there is a fear that the ETH market may be manipulated.
However, as of today there does not seem to be much difference between the BTC and ETH markets anymore, so if the SEC has already approved the BTC price ETFs there seems to be no reason to believe that it could refuse to approve the ones on the price of ETH.
Instead, in both cases, there is no sign any time soon that the US agency will allow ETFs collateralized directly in BTC or ETH (i.e., based on Bitcoin and Ethereum spot) to land on US markets, although in early 2024 this could happen.
In late 2021, when the first futures-based ETFs were launched on the price of BTC, the price of Bitcoin was close to its all-time high, but then the bear-market of 2022 began. However, it does not seem that something like that can happen now with ETH, as market conditions are completely different.Â
A total of twelve companies have applied to the SEC to be allowed to issue an ETF based on ETH price futures contracts in the US markets, including ProShares, Volatility Shares, Bitwise and Valkyrie.
According to Bloomberg’s reported speculation, Valkyrie’s could be approved around 3 October.
What are the benefits of ETFs
So-called Exchange-Traded Funds (ETFs) are funds whose shares are traded on an exchange.
If the fund is fully collateralized with a single asset, the trend in the price of its shares actually follows that of the price of the underlying asset, allowing those who buy them to take a position on that price without having to buy the underlying asset.
The latter is especially important with regard to cryptocurrencies, both because many people want to invest in crypto without having to worry about their custody, and because ETFs can be traded on traditional exchanges bypassing crypto exchanges.
However, to date, no ETFs collateralized directly in tokens, whether BTC, ETH or other cryptocurrencies, have yet been approved in the US.
However, some have already been launched on Canadian exchanges, and recently also on Euronext Amsterdam.Â
It is worth pointing out that in addition to ETFs, there are also similar products (ETNs, ETPs) that replicate the price movement of an asset without being actual stock funds.
So while in the US there are neither ETFs, ETNs or ETPs, on spot Bitcoin or Ethereum, there are, however, ETFs collateralized with futures contracts on the price of Bitcoin.
In contrast, abroad there are also ETFs, ETNs or ETPs collateralized directly in BTC.
The comments
The news of the SEC’s possible impending approval of an ETF based on ETH futures contracts apparently had no effect on Ethereum’s price.
However, the news has prompted several comments.
According to Bloomberg Senior Analyst Eric Balchunas, this news is not a surprise, although the real game is being played on the approval of ETFs on spot BTC and ETH.
James Seyffart of Bloomberg Intelligence, on the other hand, points out that the fee costs of the ETF on ETH futures are definitely low.
Overall, the news has been well received, although this has not done much to lift the price of ETH back up after yesterday’s plunge.
What is clear is that traditional markets are increasingly interested in cryptocurrencies, but that at the same time traditional investors still tend not to want to get their hands dirty with these new technologies, as they are clearly somewhat afraid of not knowing how to handle them properly.
