Would the indication of SEC approval of Ethereum futures ETFs be a harbinger of further pain?
Date: 2023-08-18 Author: Karina Ziganova Categories: BLOCKCHAIN
According to an Aug. 18 Bloomberg report, the U.S. Securities and Exchange Commission (SEC) is set to approve the first exchange-traded funds (ETFs) based on Ethereum futures
The green light from the regulator could pave the way for several firms including Volatility Shares, Bitwise, Roundhill and ProShares, which have filed applications to launch ETFs based on ETH futures.
If approved, the approval could be seen as a "win" for the crypto industry, so let's take a look at the crypto-ETF landscape to examine the potential impact.
The SEC has been hesitant to authorize ETFs based directly on cryptocurrencies until now. However, that trend changed in late 2021 when the Chicago Mercantile Exchange began trading a fund that includes bitcoin futures contracts. As a result, speculation is growing in the market around the possibility of an Ethereum futures product being next in line for approval.
The SEC has been slow to authorize a derivatives product in the second-largest cryptocurrency as the regulator continues to express concerns over potential manipulation of cryptocurrency prices and the possibility of inadequate liquidity.
Crypto-ETF Landscape.
In related news, Grayscale Investments LLC, a prominent U.S.-based crypto asset manager, is awaiting a decision from the SEC on its application to convert its bitcoin trust into an ETF. As reported on August 17, Grayscale has hinted at expanding its ETF team, indicating the firm's willingness to move forward depending on the SEC's decision.
In addition, Valkyrie Investments also filed for an Ethereum futures ETF on Aug. 16. Nearly all of the fund's assets will be invested in Ethereum exchange-traded futures, while a small portion will be allocated to collateralized investments such as cash, cash instruments or high-quality securities.
Mike Novogratz, CEO of Galaxy Digital, cited insider contacts at BlackRock and Invesco, expressing optimism that regulatory approval of a spot bitcoin-ETF is "a matter of when and not if." Institutional players, he added, are optimistic that the SEC will give spot bitcoin-ETFs the green light within the next four to six months.
While the crypto industry awaits these key decisions, the potential approval of ETHfutures ETFs signals a new era of acceptance and integration of cryptocurrencies into mainstream financial products.
Impact of cryptocurrency futures ETFs.
Interestingly, the first bitcoin ETF to launch in 2021, BITO, was launched near the top of the bull market. The chart below shows the correlation between the bitcoin price (blue) and BITO (orange). In addition, the correlation coefficient indicator below (red) identifies periods when BITO and BTC prices diverged.
BTC BITO
Those expecting the Ethereum Futures ETF to be a bullish signal can refer to this chart for historical data on the impact of past events on cryptocurrency futures. While past performance is never fully indicative of future price movements, the chart points to a warning sign for investors.
