The anticipated approval of Ethereum Exchange-Traded Funds (ETFs) may see further delays, but industry experts suggest this could be a strategic move for better market integration. With the recent success of Bitcoin spot ETFs in the U.S. market, gathering $12 billion in net inflows since January, the focus has now shifted to Ethereum’s potential financial products. However, experts like Bitwise’s CIO Matt Hougan advocate for a later Ethereum ETF launch, potentially in December, to allow for more comprehensive market absorption of Bitcoin ETFs.
This recommendation for postponement reflects a broader strategy to ensure Ethereum ETFs enter a market that is more prepared and receptive. According to a survey by Bitwise, financial advisors at the end of last year showed a strong preference for Bitcoin over Ethereum, with 71% favoring Bitcoin. This preference indicates a potential benefit in leveraging the current Bitcoin ETF hype before introducing Ethereum-based products. Additionally, Hougan points out the growing interest in stablecoins, predicting them to become a multi-trillion market by 2025, which could temporarily divert attention from Ethereum.
Regulatory hesitations and legal complexities, particularly around blockchain staking and proof-of-stake cryptocurrencies, are also factors in the delayed approval of Ethereum ETFs. Issuers like Fidelity and Ark have proposed staking a portion of their fund’s assets for yield, complicating the approval process given the U.S. Securities and Exchange Commission’s (SEC) current scrutiny of such practices. Bloomberg analysts Eric Balchunas and James Seyffart agree, expressing skepticism about the SEC meeting the May deadline for approvals, pointing out the lack of proactive discussions between regulators and issuers.
James Butterfill expects the SEC’s decision on Ethereum ETFs could extend into the third quarter of 2024 or beyond due to the unresolved issues around staking within a grantor trust framework. The SEC’s history of postponing approvals for crypto-related financial products suggests that an imminent decision in May might be unlikely.
In conclusion, while a delay in Ethereum ETF approvals might initially appear as a setback, it could strategically position Ethereum ETFs for a more successful launch. This patient approach is aimed at ensuring that Ethereum ETFs are introduced into a mature and prepared financial landscape, potentially making them a significant milestone in the broader integration of cryptocurrencies into traditional financial markets.
