Spot Ethereum ETF: The Next Frontier in Crypto Investment

Spot Ethereum ETF: The Next Frontier in Crypto Investment

BY ICISept 7 · 3 min read

The Ambitious Move by ARK Invest and 21Shares

In the dynamic world of cryptocurrencies, Ethereum has always been a prominent contender. Now, it’s on the verge of a significant breakthrough in the investment arena. ARK Invest, in collaboration with 21Shares, has taken a pioneering step by filing for a spot Ether ETF with the U.S. Securities and Exchange Commission (SEC). This ETF, named the ARK 21Shares Ethereum ETF, is designed to track the performance of Ether based on the Chicago Mercantile Exchange CF Ether-Dollar Reference Rate. The proposal indicates that Coinbase, a leading name in the crypto exchange world, will act as the custodian for this ETF.

This move isn’t ARK Invest’s maiden voyage into the crypto ETF domain. They currently have a spot Bitcoin ETF under SEC review and had previously proposed listings for two Ether futures ETFs. The crypto community is watching these developments with bated breath, especially given the SEC’s history of postponing decisions on crypto ETFs.

The Ripple Effect in the Crypto Market

The introduction of a spot Ether ETF could be a game-changer for the broader crypto market. Following the SEC’s decision to delay ARK Investment Management’s spot Bitcoin ETF, the firm’s proposal for an Ether-based investment vehicle has become the talk of the town. This proposal is among several spot crypto ETFs awaiting the SEC’s nod. The optimism surrounding regulatory approval has surged, especially after Grayscale’s recent court victory, which compelled the SEC to reconsider converting its Bitcoin Trust into a Bitcoin ETF.

However, the SEC’s approach towards crypto ETFs remains one of caution. On August 31st, just two days post the Grayscale verdict, the SEC announced a delay in deciding on spot Bitcoin ETF applications from multiple firms, including the industry giant, BlackRock. ARK Invest and 21Shares’ spot Bitcoin ETF was exempt from this delay, with the next review deadline set for November 11th.

Ethereum’s Market Response

News of such magnitude is bound to stir the market waters. Post the ETF filing announcement, Ethereum’s price saw a brief uptick. Data showcases that ETH’s price rose by approximately 3% from $1,623 to $1,669 before stabilizing in the $1,620 to $1,640 range. These market fluctuations highlight the potential influence of regulatory decisions on crypto valuations and the overarching market sentiment.

Diving Deeper: The ARK and 21Shares Vision

ARK Invest and 21Shares are no strangers to the crypto ETF landscape. Their recent filing for the Ark 21Shares Ethereum ETF is a testament to their vision of building a comprehensive crypto product lineup. Unlike the ether futures ETFs recently filed for, this new offering by ARK Invest and 21Shares plans to hold ether directly. As of the time of the filing, Ethereum’s market capitalization stood at a staggering $195 billion, second only to Bitcoin’s $500 billion.

The proposed fund, once greenlit, is set to trade on the Cboe BZX Exchange. While the filing provided a wealth of information, it remained silent on the ticker or fee for the planned ETF. The SEC, maintaining its tradition, declined to comment on the filing.

Recent events suggest that the timing for such a proposal couldn’t be better. The SEC, which has historically been hesitant about direct-holding crypto ETFs, seems to be reconsidering its stance, especially after its recent court setback against Grayscale Investments. This court decision deemed the SEC’s approval of bitcoin futures products, while sidelining Grayscale’s Bitcoin Trust to ETF conversion, as “arbitrary and capricious.”

In light of this, Bloomberg Intelligence analysts have increased their odds for a US spot bitcoin ETF approval by the end of 2023 from 65% to 75%. They are even more optimistic about 2024, with a 95% approval chance. This optimism isn’t baseless. Regulators in other regions, after warming up to crypto products, have moved beyond just greenlighting bitcoin-centric funds. Canada, for instance, approved a spot ether ETF in April 2021, shortly after giving the nod to spot bitcoin ETFs.

In conclusion, the potential introduction of a spot Ether ETF is a monumental step for Ethereum and the broader crypto investment world. As regulatory bodies like the SEC continue to grapple with the intricacies of the crypto realm, the market waits with bated breath, knowing that these decisions could sculpt the future of crypto investments for decades to come.