June 23, 2024

Crypto Prices Surge Amid Hopes for US Approval of Ether ETFs

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Cryptocurrency prices are experiencing a significant surge as speculation mounts over the potential approval of exchange-traded funds (ETFs) investing directly in Ether, the second-largest digital token. This shift marks a dramatic change from the more pessimistic outlook observed just last week.

On Monday, Ether prices skyrocketed by nearly 14% — the steepest climb since November 2022. The token continued its upward trajectory, trading at $3,675 as of 7:31 a.m. in London on Tuesday. Bitcoin also showed impressive gains, climbing toward $72,000 and nearing its mid-March all-time high of almost $74,000.

The market optimism stems from reports that the US Securities & Exchange Commission (SEC) has initiated communication with at least one exchange and one potential issuer of spot-Ether ETFs to update related 19b-4 filings. This interaction has been interpreted as an indication that the SEC might be inching closer to approving these funds. However, it’s crucial to note that a green light from the SEC is far from certain, as the 19b-4 filings are just part of the extensive regulatory paperwork required. Issuers also need the SEC to approve their S-1 registration statements before launching any products. A decision on at least one spot-Ether ETF application is anticipated by May 23.

Social media is abuzz with speculation, suggesting that the SEC may be more inclined to approve the ETFs, leading traders to scramble for positions after previously discounting the possibility of such an approval. Ether is the native token of the Ethereum blockchain, which serves as a vital commercial hub in the crypto world, particularly popular for decentralized financial services that allow investors to trade, borrow, and lend through automated software protocols rather than traditional intermediaries.

Earlier, some fund companies anticipated a rejection of their applications, citing less robust private discussions with the SEC compared to the lead-up to the launch of spot-Bitcoin ETFs. Despite a historically skeptical stance, the SEC has shown signs of a more lenient approach following a court reversal in 2023, which led to the approval of US spot-Bitcoin ETFs at the start of the year. These products, offered by major financial institutions such as BlackRock Inc. and Fidelity Investments, have collectively amassed $58.8 billion in assets, marking one of the most successful fund category debuts ever.

BlackRock and Fidelity are now seeking to launch Ether funds, viewing ETFs as a means to broaden the investor base for digital assets. These funds have attracted investments from a diverse array of entities, including retail investors, hedge funds, pension funds, and banks. Notable buyers include Millennium Management, Steven Cohen’s Point72 Asset Management, and Elliott Investment Management.

Despite the current wave of optimism, market experts caution that the SEC’s ultimate decision remains uncertain. The derivatives desk has observed many of its counterparties fading the recent price movements, anticipating that the SEC might act more slowly than market expectations suggest.

As the May 23 deadline approaches, all eyes are on the SEC’s next move, which could significantly impact the future of crypto investments and the broader financial markets.

Gerald Kelton
Digital Assets Desk

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