Bitcoin and Ethereum ETFs: Market Impact and Regulatory Challenges

Spot Bitcoin ETF approval was received, and the first quarter saw $12 billion in net inflows. This pushed BTC prices to an all-time high (ATH). Since the approval process for BTC was completed, attention turned to Ethereum, but the process there seems to be more painful. At least after the BTC approval, the ETH approval was expected in May. So, what’s the current situation?

Spot Ethereum ETF

In our previous articles, we extensively discussed how an Ethereum ETF could attract risk-seeking investors in traditional markets and how the staking feature could potentially double the interest. It was also expected that being the world’s largest smart contract platform would attract professional investors with long-term goals.

However, before all this, the SEC needs to recognize Ethereum as a commodity and grant ETF approval. The involvement of a big company like BlackRock, which has an almost zero rejection rate in ETF applications, raises hopes. Larry Fink had also stated, “Even if the SEC considers it a security, we could still have an ETF.”

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In addition to all these details, the SEC’s stance against the Ethereum Foundation and its view of Ether as a security due to the PoS transition, and not holding meetings with applicants (as was the case months before the BTC ETF approval), has dampened hopes for a positive decision by the May 23 deadline.

Current Status of the Ether ETF

In the first section, we talked about the general framework and expectations. So, what is the situation today? On April 2, the SEC announced in separate notifications that comments would be collected within 21 days after the asset managers Bitwise, Fidelity, and Grayscale’s spot ETH ETF proposals were published in the Federal Register.

We had previously mentioned which questions were asked during this comment period. There were five main questions. These included whether the application was made appropriately, the risk of fraud and manipulation in the proof-of-stake system, and a comparative assessment of BTC and ETH applications. The details are in our news article titled SEC’s Ethereum ETF Questions.

In March, the firm Blockfirm Consensys sent a comment letter to the SEC, arguing that the regulator’s concerns about fraud and market manipulation for a spot ETH ETF were unfounded. With such comments accumulating, the SEC might give a favorable decision on BlackRock’s application by the final decision date in July.