By George Ward
Reports indicate that the United States Securities and Exchange Commission (SEC) is on the verge of approving the first ETH exchange-traded funds (ETFs). The regulator’s approval of this ETF will mark a significant milestone in the cryptocurrency market.
Crypto ETF Approvals On The Rise?
The potential regulatory approval could open up opportunities for firms like Bitwise, ProShares Roundhill, and Volatility Shares, all of which have submitted their proposals to launch Ethereum-based ETFs.
Until recently, the SEC had been wary of endorsing ETFs directly linked to digital currencies, citing various reasons, such as inadequate investor protection in these ETF proposals. However, its stance began to change towards the end of 2021 following the start of trading in a fund linked to Bitcoin futures contracts on the Chicago Mercantile Exchange.
As a result, speculation about the likelihood of a similar approval for an Ethereum futures product in the coming years has continued to gain traction. However, the SEC’s approval process for an Ethereum derivative product has moved slowly.
This reluctance stems from the regulator’s ongoing concerns about the vulnerability of crypto prices to manipulation and the possibility of insufficient liquidity. Like many other asset managers, Grayscale Investments LLC, a prominent player in the US crypto asset management space, is also awaiting the SEC’s decision on its request to convert its popular Bitcoin trust into an ETF.
According to a recent update, the firm is actively considering expanding its ETF team, indicating its readiness to proceed pending the SEC’s decision on its application. While awaiting the financial regulator’s decision on its spot BTC ETF proposal, leading asset management firm Valkyrie Investments has also applied for an Ethereum futures ETF.
ETFs And Their Impact
In his opinion, Galaxy Digital CEO Mike Novogratz expressed confidence in the eventual regulatory nod for a spot Bitcoin ETF referencing the applications of the world’s most prominent asset management firm (BlackRock) and Invesco. The CEO argued that it was a matter of “when” rather than “if.”
Besides stating that institutional investors are optimistic about the SEC’s decision, Novogratz forecasted that the regulator will approve Bitcoin ETFs in the next four to six months. While the crypto sector awaits the SEC’s next move, the potential approval of ETH futures ETFs will mark a turning point in integrating cryptocurrencies into traditional financial offerings.
2021 signifies a historical moment in the world of digital finance following the US regulator’s approval of the first leveraged Bitcoin futures ETF (BITO). What’s interesting about this approval is that it occurred at a critical period when the bull market was at its peak.
Even though many crypto industry players are excited about the potential approval of the ETH futures ETF, BITO’s performance since its launch compared with BTC/USD doesn’t provide an exciting read.
On-chain data shows that BTC/USD has provided an annualized ROI of nearly 47% while BITO’s annualized ROI has been nearly -38%. The correlation coefficient chart provides a better understanding of this comparison.
While previous price patterns do not guarantee future price actions, an analysis of the correlation coefficient chart shows that investors shouldn’t be too excited about the performance of the ETH futures ETF.
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