Crypto bulls think ether ETF approval could send prices to new highs - and make way for more funds

By Frances Yue

It appears more likely that the SEC will approve exchange-traded funds tracking ether

It seems more likely that a spot ether exchange-traded fund could arrive as early as this week, as a sudden change of stance by the U.S. Securities and Exchange Commission has prompted crypto investors to boost their bets.

An approved ETF could send ether's price (ETHUSD) to a new record high and also pave the way for increased institutional adoption of other cryptocurrencies, according to analysts.

If the SEC greenlights an ether ETF this week, the token could rally to $4,000 in the short term and as high as $5,000 later this year, analysts at QCP Capital wrote in a Tuesday note. The second-largest crypto by market capitalization reached a record high of $4,865.81 in November 2021, according to Dow Jones Market Data.

Ether rose 6.7% on Tuesday to around $3,736, and is up 63.4% so far this year.

For months, crypto-industry participants were pessimistic about the approval of an ether ETF, partly due to a lack of engagement on the matter from the SEC. However, the regulator's stance seems to have shifted recently.

The SEC reportedly told major exchange operators Nasdaq, Cboe and the New York Stock Exchange on Monday to amend their applications to list spot ether ETFs, signaling that the regulator may be leaning toward approving such products. The agency faces final deadlines by the end of this week to make a decision on ether ETF applications by VanEck, Ark Invest and 21Shares.

Representatives at Nasdaq, Cboe, and NYSE didn't respond to requests seeking comments.

The last-minute request to the exchanges may suggest that the SEC is changing course and trying to get the filings approved in an expedient fashion, said Alexander Blume, chief executive and co-founder at Two Prime, an investment advisor focusing on digital assets.

If an ether ETF receives approval, it would signal that the political environment is shifting and becoming more accommodative for digital assets in the U.S., Blume said in a call with MarketWatch.

It would also demonstrate increased institutional interest in crypto assets, noted Chris Kline, chief operating officer and co-founder of Bitcoin IRA. "We may be seeing in real time that what institutions want, institutions get," Kline said.

If ether ETFs were to be approved, it would also open the door to ETFs investing directly in other cryptocurrencies, Blume added.

"The way Ethereum operates through this proof-of-stake algorithm is the same way as almost every other [blockchain], except for Bitcoin," Blume said in a call, noting that the Bitcoin (BTCUSD) blockchain uses a different consensus mechanism called proof of work.

"So whatever precedent set by Ethereum is likely to be applied to Solana (SOLUSD), Avalanche (AVAXUSD) and all these other leading blockchains and their associated crypto," he said.

-Frances Yue

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05-22-24 0047ET

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