The United States Securities and Exchange Commission (SEC) has reportedly given “preliminary approval” to three asset managers for their spot Ethereum exchange-traded funds (ETFs).
These managers include BlackRock, Franklin Templeton, and VanEck. SEC’s green light is now contingent on the submission of final offering documents before the end of this week, as reported by Reuters on 15 July, citing three industry sources.
Additionally, Fidelity, ARK 21Shares, Grayscale, Bitwise, and Invesco Galaxy are also preparing to launch their Ether products next week.
One source indicated that all eight spot Ether ETFs are expected to launch simultaneously, mirroring the SEC’s approach with spot Bitcoin ETFs.
Industry reaction and expectations
The SEC has delivered final instructions to asset managers preparing to launch these ETFs.
Bloomberg ETF analyst, Eric Balchunas, shared that the Commission has instructed issuers to submit their final S-1 filings by 16 July.
Balchunas noted that all applicants must state the fees attached to their spot Ether ETFs in these filings.
He expects the SEC to officially approve the S-1s next Monday after trading hours, which would allow the spot Ether ETFs to begin trading on Tuesday, 23 July.
Gary Gensler’s commission had previously delivered a first round of feedback on the S-1 filings in late June, about five weeks after approving the 19b-4 filings on 23 May.
Bitwise’s chief compliance officer, Katherine Dowling, noted a reduction in back-and-forth issues with the SEC, suggesting a nearing approval.
“So that points all signs in the direction that we are close. We’re close to the finish line on the launch”, Dowling said on 9 July.
Bitwise’s chief investment officer, Matt Hougan, speculated that the spot Ether ETFs could attract up to $15 billion in inflows within the first 18 months of trading.
This is roughly the same amount that the spot Bitcoin ETFs have garnered since their launch six months ago.
If approved, these spot Ether ETFs would be listed on major exchanges such as the Nasdaq, New York Stock Exchange, and the Chicago Board Options Exchange.
Market implications
Ether’s price has reacted to the news, trading at $3,484, up 6.7% over the last 24 hours.
Investors are increasingly looking to the options market to hedge against potential price swings.
Data from Deribit and Kaiko shows a rise in implied volatility (IV), indicating higher demand for options or derivatives to protect against price fluctuations.
IV has increased more for short-term contracts, reflecting traders’ willingness to pay more to hedge against short-term price moves.
Analysts at Kaiko noted a spike in near-term contracts implied volatility, suggesting uncertainty among traders.
“The increase in IV on the 19 July contract suggests traders are willing to pay more to hedge existing positions and protect against sharp price moves in the short run”, Kaiko analysts said in a newsletter.
This hedging activity aligned with bullish expectations for the spot Ether ETFs.
Reports from Amberdata and a joint analysis by Bybit and BlockScholes also reflected optimism about $ETH, evidenced by its sustained volatility premium over $BTC.
According to Amberdata, the spread between Deribit’s 30-day Ether and Bitcoin implied volatility indices has consistently averaged around 10% since late May, significantly higher than the 5% in the first quarter.
The anticipated debut of spot Ether ETFs has traders preparing for potential market volatility, mindful of past trends following the launch of Bitcoin ETFs.
Despite this, the current market mood suggests a more measured approach, potentially reducing the risk of a post-debut sell-off.
Crypto exchange Bybit and analytics firm BlockScholes observed that “investors are increasingly optimistic about $ETH, particularly in anticipation of the imminent launch of the first Ether Spot ETFs in the United States”.
The introduction of spot Ether ETFs is expected to provide investors with a new avenue to gain exposure to Ethereum.
This could potentially lead to substantial investment inflows and the introduction of additional cryptocurrency-based financial products.
