The Securities and Exchange Commission late Thursday approved a rule change that would allow spot ether ETFs to trade in the U.S. Ethereum price and bitcoin rebounded slightly Friday. Cryptocurrency stocks swung higher.
The SEC approved the rule 19b-4 forms for eight ether ETF applications, including BlackRock, Fidelity, Grayscale, ARK Invest, VanEck, Invesco Galaxy and Franklin Templeton. The S-1 registration statements still need to be approved before the ETFs can officially debut. The SEC order did not provide a timetable for when the S-1 forms would be approved. It also didn't offer a date they would begin trading.
The ether ETF order comes after the SEC in January approved spot bitcoin ETFs to launch on U.S. exchanges. Ether is the second-largest cryptocurrency and powers the ethereum network. The ethereum network operates on a proof-of-stake consensus. It hosts various applications including NFTs, the tokenization of real-world assets, and Web3 games.
"We applaud this decision, as we believe the evidence clearly shows that ETH is a decentralized commodity, not a security," Matthew Sigel, head of digital assets research at VanEck, wrote on social media platform X following the order. "We expect the improved political backdrop will lead to further victories for digital asset investors and developers."
The VanEck spot ethereum ETF will trade on the CBOE exchange after the final approvals.
Ethereum ETFs, Another Major Milestone
"The ethereum ETF approval is a second large step forward for the crypto industry," Sergey Nazarov, co-founder of Chainlink, wrote in a note to IBD. Chainlink's network connects the blockchain to real-world data sources to automate smart contracts. "It proves that the capital markets are now getting involved in the crypto industry in earnest for some of their largest user bases and most widely-used products."
The approval order proves Chainlink's thesis that capital markets will be the next large source of adoption for the crypto industry, Nazarov says.
One of the most important aspects of the ETF approval is the spotlight it puts on the potential of smart contracts and decentralized applications (dApps), which are critical use cases for ethereum, he said. "We continue to observe increasing interest in smart contracts, the adoption of blockchain technology, and a growing interest in cryptocurrencies as a legitimate asset class," Nazarov said.
Nathan McCauley, CEO of Anchorage Digital, expects the ethereum ETFs will provide a boost similar to the bitcoin ETF launch. Anchorage Digital is an institutional crypto custodian and crypto infrastructure provider.
"What the ETF wrapper has done for bitcoin is now possible for ethereum," McCauley told IBD. "By providing a regulated and accessible pathway for direct ethereum exposure, a spot ETF marks a major unlock for billions in institutional dry powder."
The spot bitcoin ETFs have recorded about $13.44 billion in inflows through May 23, according to U.K.-based Farside Investors.
However, this is just the first step. "The next step is adding staking to the ETFs, which would benefit investors while supporting the security and scalability of the network in the long term," McCauley said. "If the story of 2024 is the steady march toward a more mature market structure, bitcoin and ethereum ETFs are key drivers of the momentum."
Ethereum To New Highs?
Joel Kruger, market strategist at LMAX Group, believes ethereum could hit new highs this year.
"Both bitcoin and ETH had made record highs back in 2021, but only bitcoin has managed to take out that previous record high in 2024," Kruger wrote in a note to IBD. "We believe this is important as ETH is still looking to make its own record high in 2024 and has a lot of room to run for this to happen."
"Given the positive momentum on the adoption and regulatory fronts, we suspect ETH will indeed succeed in making a fresh record high," he said. "Which could very well translate to another big surge in bullish momentum over the coming days and weeks."
Ethereum Price Action
Ethereum climbed to $3,750 Friday afternoon, but still below its Thursday high of $3,894 prior to the announcement. Earlier in the week, ethereum had rallied on buzz that the SEC would take a step toward spot ETF approvals.
The No. 2 crypto is trading below its March 12, 52-week high of $4,092 and well below its November 2021 peak above $4,800. Still, ethereum spiked nearly 64% so far in 2024.
Bitcoin rose to $68,900 Friday and trended toward its Thursday peak of $69,440. Bitcoin on Monday crossed $70,000. But it hasn't been able to rebound to a record high of $73,798 from March 14. The world's top crypto rallied about 64% this year.
Among crypto stocks, Coinbase jumped 8.6% Friday to rebound above its 50-day line. COIN stock fell 5.5% Thursday to drop below the moving average.
BlackRock's iShares Bitcoin Trust and other bitcoin ETFs swung about 3.1% higher Friday.
Robinhood rallied 6.6% Friday to close at 20.51. Shares cleared a 20.55 buy point on Monday but fell back on Wednesday-Thursday.
You can follow Harrison Miller for more stock news and updates on X/Twitter @IBD_Harrison
