The US SEC has finally "approved," and the Ethereum spot ETF has successfully passed!

Author: Nianqing, ChainCatcher

Around 5 a.m. Beijing time on May 24, the U.S. Securities and Exchange Commission approved the 19b-4 forms for 8 spot Ethereum ETFs, with the eight issuers being Grayscale, Bitwise, iShares, VanEck, ARK & 21Shares, Invesco & Galaxy, Fidelity, and Franklin.

Everyone was waiting for this historic moment, and the SEC's official website crashed multiple times.

Previous report mentioned that on Tuesday, the SEC requested exchanges to expedite the updates to their 19b-4 applications. In the following two days, all eight issuers, except for Hashdex, submitted their final revised 19b-4 forms before the deadline. Additionally, the S-1 documents (the prospectus documents for potential issuers) will be approved after the 19b-4, at which point each Ethereum spot ETF can prepare for listing.

Moreover, it is expected that the scale of the Ethereum ETFs will initially be smaller than that of Bitcoin ETFs. For example, the Grayscale Ethereum Trust currently has approximately $11 billion in assets, which is significantly smaller than the size of the Bitcoin fund before its conversion.

First Batch of Approved Ethereum Spot ETFs with No Staking Yield

It is worth mentioning that although the Ethereum ETFs have been approved, the key to their approval was the abandonment of the staking feature.

Recently, issuers have submitted revised S-1A documents to the SEC, removing the staking feature. Among them, VanEck submitted a revised S-1A document to the SEC in February this year, which was the first amendment among many issuers' S-1 registration statements that did not include staking provisions.

Unlike Bitcoin, Ethereum's proof-of-stake consensus protocol allows users to stake their assets on the network, with current staking yields around 3%. Therefore, if there were a staking feature, investors could stake ETH in the ETF to earn passive income and potentially bring capital appreciation to their held assets, which was originally a relatively attractive point of Ethereum spot ETFs compared to Bitcoin spot ETFs.

However, staking has always been a sensitive issue for Ethereum. Previously, the SEC accused staking-as-a-service products in lawsuits against Coinbase and Kraken, claiming that providing staking services through their platforms violated securities laws.

Many in the crypto market believe that the key modifications made by issuers to the spot Ethereum ETF applications are beneficial for the Ethereum blockchain itself, but detrimental to the ETF products themselves. Some market participants argue that if the ETF cannot stake its tokens, then the appeal of the spot ETF is not as strong as directly purchasing stakable Ethereum.

Bitcoin spot ETF issuers CoinShares and Valkyrie have already stated that they will not apply for a spot Ethereum ETF, primarily because the spot Ethereum ETF cannot participate in staking.

In contrast, the Hong Kong Securities and Futures Commission revealed to Bloomberg yesterday that it is considering allowing staking for spot Ethereum ETFs in the region and has been in discussions with cryptocurrency ETF companies in Hong Kong about providing staking services through licensed platforms. If approved, issuers will jointly develop a plan for staking Ether.

What Will Be the Market Impact?

On the eve of the approval of the Ethereum spot ETFs, several institutions and analysts have made relevant predictions about the market afterward.

KOL Ni Da @ Phyrex_Ni predicts that after the ETF approval, ETH breaking the previous high of $4,800 "is definitely not a problem," but it is uncertain whether it will happen immediately upon approval.

Geoff Kendrick, head of foreign exchange research and digital asset research at Standard Chartered Bank, stated that if the Ethereum spot ETF is approved, it is expected that 2.39 million to 9.15 million ETH will flow into the market in the first 12 months, equivalent to about $15 billion to $45 billion. Additionally, he predicts that ETH will reach $8,000 by the end of 2024.

Bernstein analysts Gautam Chhugani and Mahika Sapra predict that the approval of the spot Ethereum ETF will drive the price of Ethereum up by 75% to $6,600. They noted that the SEC approved a similar Bitcoin product in January, which stimulated a 75% increase in Bitcoin prices in the following weeks, and they expect a similar price movement for ETH.

QCP Capital predicts that if the spot ETF is approved, the price of Ethereum will be closer to a short-term target of $4,000 and may reach $5,000 later this year.