After Bitcoin Euphoria: All Eyes on Ethereum ETFs, Are They Justified?

The recent flurry of activity surrounding Bitcoin spot ETF approvals has the crypto world buzzing about what's next. All signs point to Ethereum being the next major digital asset for exchange-traded fund providers seeking regulatory approval.

Main points

Ethereum (ETH) has significantly outperformed Bitcoin in recent days, indicating that traders are anticipating the approval of spot ETFs for ETH. The approval of the spot Bitcoin ETF has increased the chances of the approval of the ETH spot ETF as the SEC has identified a fraudulent/fraudulent mechanism affecting both spot and futures prices. Traders are also stockpiling other ETHT ETF-linked assets, such as Layer-2 tokens. BlackRock CEO Larry Fink sees value in the Ethereum ETF, which gives him confidence in the future. Several major firms have offered ETH spot ETFs. However, some predict that the approval of the ETH spot ETF could face delays due to regulatory concerns surrounding the classification of Ether as a security rather than a commodity.

Ethereum has rallied more than 10% against Bitcoin since the fake news of the BTC Spot ETF approval came out earlier this month. According to data analyst firm IntoTheBlock, this indicates that traders are operating under the assumption that Ethereum could become the next cryptocurrency space ETF.

The logic ultimately follows the Securities and Exchange Commission's (SEC) own reasoning in approving Bitcoin spot ETF products. In the approval order, the SEC stated that any manipulation that could affect the Bitcoin spot markets could have a similar effect on the related futures markets. Since Ethereum already has futures-based ETF trading in the US, the door seems open for regulators to apply the same thinking directly to the ether-related space.

The enthusiasm of the market is more than Ethereum itself. Other crypto assets related to the Ethereum ecosystem have seen traders pile up over the past week. This includes layer-2 tokens associated with Ethereum's liquidity solutions, as well as tokens tied to liquid staking protocols. Anticipating that adoption of spot ETFs tracking digital assets will contribute significantly to prices, the broader community is putting the green light on ether spot ETFs.

And that approval may have gotten more likely following comments from BlackRock CEO Larry Fink. The head of the world's largest asset manager told CNBC that he is looking at the value of the Ethereum ETF. BlackRock has already started the application process for such a product.

Major financial powerhouses like Fidelity, Ark Invest and VanEck have thrown their hats in the ring with spot ether ETFs. In fact, VanEyck has a deadline from the SEC decision coming up on May 23rd of this year. Some analysts give a more than 70% chance of approval on that day.

However, there are also cautionary notes from other marketers. Investment banker TD Cowen predicts that delays are likely ahead, with the SEC likely to take a more cautious approach in terms of Bitcoin approvals. A key question centers around whether regulators will classify Ether as a commodity rather than a security, on a par with bitcoin. If it's the latter, it introduces more complexity in implementing exportable products around traditional securities. Until the SEC gains more confidence in looking at the recently approved Bitcoin ETFs, the Ethereum product may remain on the sidelines despite industry pressure.

However, with institutional and retail investment gaining SEC approval, the road ahead looks increasingly positive. While delays can still happen, it looks like the Ethereum ETF will be late. Once open to the masses for trading, such a product will arguably be more stimulating for growth and mainstream adoption than Bitcoin has ever been.

As the crypto community turns its attention to its next milestone, the stakes couldn't be higher if Ethereum were to fully step out of Bitcoin's shadow and solidify its status as the leading smart contract platform.