Ethereum (ETH) ETF race kicked off on September 6th with applications from Ark Investment and 21 Shares. How does this type of ETF differ from futures-based ETH ETFs and what potential effects can it have on the price and adoption of Ethereum (ETH)?
Ethereum ETF Race!
Asset management firms ARK Invest and 21Shares submitted regulatory approval requests to the U.S. Securities and Exchange Commission (SEC) on September 6th for launching an exchange-traded fund (ETF) specifically designed to hold ETH. This ETF marks the first effort to launch such a fund in the United States.
Additionally, as revealed by James Seyffart, the initial application made by Ark 21Shares was classified as an S-1 filing. Such filing does not trigger an immediate countdown for SEC approval. However, a subsequent document classified as a 19b-4 filing was submitted by the Chicago Board Options Exchange (CBOE) on September 6th. In this 19b-4 application, CBOE officially requested the listing of ARK 21Shares and VanEck Ethereum ETF investment products on CBOE’s BZX Exchange.
James Seyffart pointed out that 19b-4 filings indicate that the SEC decision-making process is currently underway, unlike the previous S-1 filings. The countdown for the final decision has also begun. Futures-based Ethereum ETFs significantly differ from spot Ethereum ETFs. In futures-based ETFs, ETH itself is not held as an asset. Instead, these ETFs use derivative contracts, particularly futures contracts, as their underlying assets. As a result, the value of these ETFs is directly dependent on the performance of ETH futures contracts and may not precisely track the real-time spot price of ETH.
Furthermore, the liquidity of futures ETFs is dependent on the liquidity of the underlying ETH futures contracts. The lack of liquidity in futures contracts can affect the liquidity and trading of the ETF. On the contrary, spot Ethereum ETFs hold actual ETH as the underlying asset. This means that spot Ethereum ETFs may closely track the spot price of ETH, which is the current market price of Ethereum. Additionally, the liquidity of spot Ethereum ETFs is determined based on the availability and trading volume of ETH.
Advantages of Ethereum ETFs!
The introduction of Ethereum ETF can simplify gaining access to ETH for a wider range of investors. This enhanced accessibility may have the potential to stimulate increased demand for Ethereum. Additionally, ETFs are known for their high liquidity, and the establishment of an Ethereum ETF can enhance liquidity in the Ethereum market. This increased liquidity can attract more investors and potentially lead to increased trading volumes.
The 4-hour timeframe chart of Ethereum exhibited a price increase on September 6th. At the close of the trading, ETH was trading around $1,632, showing a slight price increase on the daily timeframe. However, at the time of writing this article, it had retraced some of these gains and was trading around $1,630. This indicated that the latest news about the ETF had a minimal impact on the ongoing price trend. However, this situation can change when the ETF approval news emerges.
