Spot Ether ETFs Make US Debut

Ether's rising valuation and strong early trading volume

In the days before the ETFs launched, Ether's price experienced volatility despite investor enthusiasm. At 2:40 a.m. EDT on Tuesday, Ether was valued at US$3,436.

Between 4:15 a.m. and 5:15 a.m. EDT, a 2 percent increase was observed, taking the price to US$3,528.

At the opening bell, Ethereum was valued slightly lower, at US$3,495.82. In the first 20 minutes of trading, it fell by 1.63 percent.

However, Bloomberg ETF analyst Eric Balchunas reported promising early trading data, revealing US$112 million traded within the first 15 minutes.

Grayscale's Ethereum Trust and BitWise held the top two spots, recording US$37. 9 million and US$25.5 million, respectively, in capital inflows. Michaël van de Poppe, founder and CEO of trading firm MNTrading, noted “The Ethereum ETF launch is heavily undervalued and I expect it to trade towards an (all-time high) in the coming 1-2 months.”

As of writing, Ether, which has a market cap of US$414 billion, is valued at US$3,485.

The launch of these ETFs is expected to further boost Ether's market presence. “Like the success of the Bitcoin ETF, the Ether ETFs will open up access to invest in this asset for a new group of investors. In simple supply/demand terms, bringing in a new group of investors will increase the demand for Ether,” Greg Taylor, CIO at Purpose Investments, told the Investing News Network.

“With the supply side already regulated by existing rules, the increase in demand should be a net positive for the price over the long term.”

Ethereum price forecasts have garnered significant attention as experts and analysts predict substantial growth in the coming years. Projections have ranged from US$6,000 to US$14,000 by next year.

“It's hard to call the short-term moves in any asset, especially one as volatile as crypto. However, we are positive on the outlook longer term for cryptocurrencies as the use case grows for many investors. We are also seeing more interest across the board from investors to gain access to assets that would benefit in a world in which the US dollar starts to weaken,” said Taylor.

Regulatory concerns and approvals

Initially optimistic, the prospects of Ether ETF approval in 2024 became shrouded in uncertainty after reports of talks between regulators and institutional investors breaking down in March.

The US Securities and Exchange Commission (SEC) had previously expressed concerns about complexities related to crypto staking, including market risks, custody issues, and potential conflicts of interest. In lawsuits filed against Coinbase and Kraken, the SEC has accused both companies of offering unregistered securities through their staking-as-a-service programs. Both cases are ongoing.

However, in a surprising turn of events, the SEC requested updated applications to offer Ether ETFs from the New York Stock Exchange, the Nasdaq and the Chicago Board Options Exchange on May 20, prompting a 24 percent rise in Ether’s valuation between May 20 and May 23.

Ether ETF applicants received 19b-4 form approvals confirming that institutions will not stake Ether for yield from the SEC on May 23. Bloomberg research analyst James Seyffart was quick to clarify that approval of spot Ether ETFs did not guarantee their immediate launch, emphasizing the likelihood of a period of “at least weeks, and potentially months” between the approval and the actual availability of these ETFs for investors, which proved to be an accurate timeline.

Ethereum’s broader use cases

Ethereum expanded on blockchain technology to enable broader use cases than a digital currency, which is Bitcoin’s foundational application. Ethereum’s platform enables smart contracts, self-executing agreements with the terms of the agreement between buyer and seller directly written into code; and dApps, decentralized applications that run on the blockchain.

The network also supports its native digital currency, Ether, which is used to pay for transaction fees and computational services on the Ethereum network.
Common use cases for dApps on Ethereum, and other platforms like Solana and Cardano, include decentralized finance, non-fungible tokens (NFTs), gaming, decentralized autonomous organizations, digital wallets and gambling.

Investor takeaway

The launch of spot Ether ETFs in the US represents a significant step forward for the cryptocurrency industry. With strong early trading volume and growing investor interest, these ETFs are poised to play a crucial role in the broader adoption of Ethereum and its associated applications.

“(We are) very excited to see the launch of spot ether ETFs in the US,” said Taylor. “It's great to see growing options for investors seeking regulated exposure to digital assets.”