The news that the U.S. Securities and Exchange Commission (SEC) granted approval for a rule change that would clear the way for the listing and trading of spot Ether exchange-traded funds (ETFs) made international headlines and traveled around the world at lightning speed, causing as much surprise as excitement among members of the crypto community. While this represents only the first step toward the launch of these new crypto products on the market, analysts and experts are already thinking about the impact that this major milestone might have on Ethereum.
Analyzing the potential effects of the upcoming ETH ETFs is not only important for making an accurate Ethereum price prediction, but also for gaining a deeper understanding of how market dynamics function and what that could mean for the evolution of the Ethereum network. With Ether ETFs anticipated to start trading by the end of the summer, we might be witnessing some major changes in Ethereum’s development.
A game-changer for Ethereum
In trying to figure out how Ethereum might react to the news, one might be tempted to draw parallels to Bitcoin’s situation. Bitcoin already passed this threshold a few months earlier, on January 10, when the SEC announced the approval of the first exchange-traded funds tracking the price of Bitcoin. As expected, the decision was received with great enthusiasm by Bitcoin and crypto supporters around the world.
However, the launch of ETF products could have a much bigger impact on Ethereum than it had on the leading coin because the two crypto projects have very different contexts. Bitcoin has always been and continues to stand as the dominant crypto, with a trading value and market capitalization much higher than all other coins. Bitcoin has long established its status as a store of value and no one is disputing its reliability and power. Let’s not forget that Bitcoin has already been declared a legal tender in two countries, El Salvador and the Central African Republic (CAR), and enjoys wider acceptance than any crypto in existence. So, the arrival of spot Bitcoin ETFs, as auspicious as it might be, simply reinforces what we already knew about the main coin.
Ethereum, on the other hand, doesn’t stand on as firm a footing as Bitcoin. Despite being the second-largest crypto by market cap and the most successful of the altcoins, Ethereum faces more intense competition than Bitcoin, which almost seems untouchable in its ivory tower. This is also demonstrated by the discrepancies in the two crypto’s performances this year. While Bitcoin went on a rally following the approval of spot BTC ETFs and even topped its former record, Ethereum registered far more modest gains and has yet to surpass its previous high.
Therefore, Ethereum stands to gain more than Bitcoin from the SEC’s watershed decision. For starters, we now know for sure that Ethereum, just like Bitcoin, will not be classified and treated as a security. With this regulatory dilemma finally put to rest, institutional investors might find Ethereum much more appealing and consider it when assessing their investment options.
As a programmable blockchain platform with smart contract functionality, Ethereum has provided the infrastructure and resources for the development of an extensive decentralized application (dApp) ecosystem, becoming a trailblazer in the DeFi space. Once ETH ETFs begin trading, the potential inflows from these products could help Ethereum bolster its dominance as the main blockchain platform in the industry for project development and thus attract an even larger number of developers.
Ethereum also seems to be the go-to platform for major crypto projects. In fact, projects built on top of the Ethereum blockchain experience inflows that exceed the market cap of stablecoins. So far, the projects hosted by Ethereum are the only ones attracting massive capital from institutional investors due to their long track record of success, and that could become a more pronounced trend in the future.
It’s also possible that the advent of Ethereum-based ETFs could cause the Ether price to surge. For now, the Ethereum price has been rather stagnant, moving sideways below the $3,600 resistance zone. This suggests that the market might be waiting for a trigger, and the launch of spot ETH ETFs could serve as the catalysts that will spark a bull run for the altcoin. At the time of writing, Ethereum was trading at $3,586, with a market cap of $438.52B. A potential price increase will obviously enhance investments and boost activity on the platform, breeding more innovation and further growth for the altcoin leader.
Another major win in Ethereum’s bag
The green light that Ether ETFs received from the SEC is not the only victory Ethereum has registered these past few months. On June 19, Ethereum developer Consensys announced that the Enforcement Division of the SEC will officially cease their investigations into Ethereum 2.0. which was based on Ethereum’s potential status as a security.
The regulator changed its standing on the matter, going from stating that Ethereum is not a security in 2018 to starting an investigation into Ethereum in 2024 for potentially violating security laws following the network’s transition to the Proof-of-Stake (PoS) consensus mechanism. As a result, Consensys filed a lawsuit against the agency in April 2024, looking to put a stop to their inquiry, which the SEC eventually did.
With the approval of the spot Ether ETFs, which is based on Ether being a commodity, the SEC basically acknowledged that Ethereum is not a security after all, so they lost the legal ground to continue their investigation into Ethereum 2.0. This win brings more regulatory clarity for Ethereum and the crypto market as a whole, enhancing the asset’s legitimacy and giving investors more reasons to include it in their portfolios.
These recent developments can usher in a new era of progress for Ethereum, where the altcoin enjoys widespread acceptance and becomes an even more powerful player in the crypto space.
