ETFs, one of the biggest challenges and milestones of the cryptocurrency markets, continue to remain on the agenda and at the center of discussions despite the spot Bitcoin ETF approval in January 2024.
In the ETF journey that started in 2013, the first fruit was taken in 2021 with the approval of the futures Bitcoin ETF by the relevant institutions. After the Bitcoin futures ETF, another ETF approval was recorded as the approval of the Ethereum futures ETF in September 2023. After this approval, the fixtures of the market officially took their first step into the traditional markets.
Although the journey has included concrete steps on the futures side, the struggle for the spot side was not as fast and easy as the futures side. Applications for spot ETFs were rejected one after another and then postponed one after another. Statements made by the relevant institutions and officials led to a growing belief that approval would remain a dream. Until the SEC's language changed.
First glimmer of hope from the SEC
Spot ETFs, which cryptocurrency investors were looking forward to, described as a new channel to the entire market, thought to be a new channel for institutional investors to flock to, and called the turning point of development and expansion, caused everyone to start holding their breaths after the SEC's positive statements and one-on-one meetings with the relevant companies after dozens of sensational developments. This adventure allowed cryptocurrency investors to embrace each other with hope again after a long bear market.
Ethereum between two US government agencies
Another reason why the process was so arduous was the war between the SEC and the CFTC, the two major regulatory bodies in the US before ETFs and ETF approval. How was it possible for spot ETFs to be approved when the CFTC and SEC could not even find common ground with each other due to their different definitions of cryptocurrencies?
The star of this turmoil was Ethereum. While the CFTC was clearly calling Ethereum a commodity, the SEC was avoiding this definition. When SEC Chairman Gary Gensler was brought before the committee after his harsh steps against the cryptocurrency industry, he could not give a clear answer to the question "Is Ethereum a commodity?", causing the committee to get angry. However, despite this trial, there was no clear result.
After the approval of the Spot Bitcoin ETF, expectations for this approach have changed considerably. Both the SEC's statements and experts' inferences about the critical potential of the approval of the futures Ethereum ETF put the entire market in an expectation for Ethereum after Bitcoin. Experts evaluated the process from every angle
Bloomberg ETF analyst James Seyffart said: "The CFTC is clearly calling Ethereum a commodity. They don't call it a security. The SEC has approved Ethereum futures ETFs. So Gary Gensler will not explicitly say whether Ethereum is a security or a commodity. But the fact that they have approved these Ethereum futures ETFs means that they tacitly recognize Ethereum as a commodity. That's why I think we could see potential Ethereum ETFs approved this year."
He clarified the rationale for why he believes that approval in this context could happen.
In parallel with the statements of experts, SEC Commissioner Hester Peirce's statements also raised hopes for spot Ethereum ETFs. Peirce touched on the spot Ethereum ETF process, stating that the spot Bitcoin ETF process should not be as limp as in the spot Bitcoin ETF process, and stated that he hopes that the process for Ethereum will go more smoothly.
Pointing to the jury verdict from the court between Grayscale and the SEC before the spot Bitcoin ETF, Peirce emphasized that such a thing should not be needed for Ethereum. In the court decision in question, it was stated that the SEC's attitude towards the spot Bitcoin ETF process was arbitrary and capricious:
"We shouldn't need a court to tell us that our approach is 'arbitrary and capricious' to get it right. I think that kind of lesson will certainly stick with us after we hear from a court that our approach was wrong. That's not how our approval process should work this time."
Expectations and post ratification
Experts, who evaluated the dispute between the CFTC and the SEC in this way at this point, targeted an approval for spot Ethereum in May. The expectation in the markets was also reflected in the data. After the spot Bitcoin ETF, Ethereum trading volume and share continued to increase in futures markets. At this point, expectations for May rose up to 70%.
However, JPMorgan analysts stated that they do not give more than a 50% chance that these spot Ethereum ETF applications will be approved by May.
There is also a belief that the approval of the Spot Ethereum ETF will open the door and set a precedent for altcoin ETFs. Unlike Bitcoin, it is thought that the SEC may deter ETF applications to be made on behalf of other altcoins with the application revisions it will demand on the Ethereum side. Another thought is that this approval will enable many altcoins to reach the traditional market, and then dozens of them can find a place for themselves.