The long-awaited approval of spot Ether exchange-traded funds (ETFs) in the United States didn’t trigger the immediate price surge some expected. Here’s why:
Pre-Approval Buying and Launch Delays:
- Crypto commentators like Zach Rynes suggest that investors who anticipated the approval may have already bought Ether (ETH) beforehand, dampening the post-approval price movement.
- Ether had already seen a significant 29% rise in the week leading up to the news, fueled by speculation of a potential SEC shift on ETF approvals.
Wait for the Launch: S-1 Filing Hurdle:
- While approved by the SEC, these ETFs haven’t been greenlit for trading yet. They require an additional step – an S-1 filing approval by the SEC.
- This comprehensive document details the financial health and risk profile of the issuing company, along with the specific securities it intends to offer.
- As of now, VanEck recently submitted its revised S-1 filing, and analysts predict it could take weeks or even months for approval.
Future Inflows and Potential Price Driver:
- Many analysts, including Rynes and crypto research firm Second Mountain, believe the real price impact will come from investor inflows once the ETFs begin trading.
- Second Mountain predicted a “massive capital inflow” in the billions during the first week of launch.
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Tempering Expectations: Past Performance as a Guide:
- Some experts caution against assuming an immediate upward trend. Bitcoin’s price, for example, dropped 15% after the launch of spot Bitcoin ETFs in January 2024. It took a month for the price to recover and climb 30%.
Grayscale Conversion and Potential Outflows:
- Grayscale’s plan to convert its existing Grayscale Ethereum Trust (ETHE) into a spot ETF raises concerns about potential outflows, similar to what happened with the Grayscale Bitcoin Trust (GBTC) after Bitcoin ETFs launched.
- Some crypto traders worry that a significant portion of the $11 billion+ ETH locked in ETHE for years could be withdrawn when the spot ETF becomes available.
Undervalued Ethereum? Long-Term Optimism:
- Some Ethereum proponents like independent educator Sassal argue that Ether is undervalued, and the market has only had a few days to fully digest the ETF approval news. Bitcoin, meanwhile, saw a minor dip after the announcement but has since recovered.
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