Ether Price Drops After Spot ETH ETFs Win Landmark SEC Approval

The price of Ethereum (ETH) barely moved on Friday after the U.S. Securities and Exchange Commission permitted eight asset managers to list exchange-traded funds (ETF) based on the spot price of ether.

Ethereum’s price hit $3,937 shortly after the confirmed approval, per data from CoinGecko, then dipped sharply to as low as $3,640. ETH is changing hands at $3,705 as of press time.

Spot Ethereum ETFs Are A Go

On May 23, the Securities and Exchange Commission greenlighted Ethereum trading on Wall Street. The following funds were OK’d in the filing: the Grayscale Ethereum Trust, the Bitwise Ethereum ETF, BlackRock’s iShares Ethereum Trust, VanEck Ethereum Trust, ARK/21 Shares Ethereum ETF, Invesco Galaxy Ethereum ETF, Fidelity Ethereum Fund, and Franklin Ethereum ETF.

The approval marks a stunning about-face by the top financial regulator. After clearing spot Bitcoin ETFs earlier this year, the SEC did not engage as much with issuers on Ethereum ETFs.

What’s more, as ZyCrypto reported previously, a lawsuit filed by Ethereum software company Consensys against the SEC alleged that the regulator has secretly considered ETH to be an unregistered security for more than a year.

That, however, changed recently prior to the May 23 deadline. News of the SEC asking issuers on Monday to update their 19b-4 filings sent a shock wave through the industry. In greenlighting the spot ETH ETFs on Thursday, the agency has implicitly conceded that ETH is not a security in itself.

However, it’s crucial to highlight that the approval process slightly differed from the approval of spot Bitcoin ETFs in January.

Unlike the spot Bitcoin ETFs given the nod through voting by a five-member committee including SEC Chairman himself Gary Gensler, spot ETH ETFs were approved by the Trading and Markets Division of the SEC using “delegated authority”. This means that a commissioner could still challenge the approval within the next 10 days.

Ether Price Largely Disappoints Post-SEC Approval

ETH has lost 5.2% of its value on the day, but over the past seven days, the asset is up a staggering 25%.

Similar to spot BTC ETFs, the ether investment products will provide safeguards for U.S. investors, allowing them to gain exposure to the industry’s second-largest cryptocurrency in a well-regulated and easily accessible structure. 

Ether’s next major price catalyst could be ETF inflows once they start trading on U.S. exchanges. However, some industry experts suggest that inflows might not immediately lead to a price upswing. Notably, the price of Bitcoin plummeted 15% after spot BTC ETFs were greenlighted for trading in mid-January. CoinMarketCap data shows that the premier crypto took roughly 30 days to soar over 29% to around $51,800.

There are also concerns that Grayscale’s conversion of its closed-end Grayscale Ethereum Trust (ETHE) into a spot Ether ETF could lead to massive outflows — similar to what was witnessed with the Grayscale Bitcoin Trust (GBTC) following the January approval. Notably, the GBTC has bled a total of $17.6 billion in investor cash since the nearly a dozen spot Bitcoin ETFs commenced trading on Jan. 11.