The U.S. Securities and Exchange Commission (SEC) has commenced discussions on the S-1 form in applications for the registration of spot Ethereum ETFs, according to The Block, citing sources.
“Essentially, everything is just beginning. It feels like the [Division of Investment Management] was somewhat caught off guard by the change in sentiment,” said a representative of one of the potential fund issuers.
An insider added that they do not expect the approval process to be canceled but remain cautious.
Following the news, Ethereum’s price surpassed $3800. Over the week, the asset gained 26.5%, outpacing Bitcoin, which increased by only 4.8%.
The ETH price exceeded $3900. At the time of writing, the asset is trading around $3940, with a market capitalization of $472 billion.
As the deadline for applications approaches, a bipartisan group of U.S. House lawmakers, including Majority Whip Tom Emmer and New Jersey Democrat Josh Gottheimer, sent a letter to SEC Chair Gary Gensler urging the approval of spot Ether ETFs.
A bipartisan group of House lawmakers (incl Majority Whip Tom Emmer and NJ Democrat Josh Gottheimer) have sent Gary Gensler a letter urging the SEC to approve spot Ether ETFs (and ‘other’ digital assets) bc it offers investors crypto access in regulated transparent safe format pic.twitter.com/YLSJh6n0lF
— Eric Balchunas (@EricBalchunas) May 23, 2024
Meanwhile, the total value locked in staking assets has exceeded 32 million ETH (~$125 billion at current prices), according to Nansen. This figure has surpassed the FDV of the Solana network, which stands at $102 billion.
Over 32m $ETH is locked up for staking. That’s 27% of ETH’s total supply. At current prices, that’s $121b. As a point of comparison, Solana’s total FDV is $103b.
Supply crunch incoming. pic.twitter.com/BzgCI6Xm65
— Nansen ? (@nansen_ai) May 22, 2024
“A supply crunch is incoming,” noted the company’s analysts.
For full approval of ETH-ETF, the regulator must first approve the 19b-4 forms, after which the S-1 registration statements will take effect.
On May 20, media reported that the agency asked potential issuers to update 19b-4. Today, May 23, marks the deadline for considering requests from VanEck and Grayscale.
Bloomberg analyst Eric Balchunas speculated that the SEC might release a statement around 16:00 GMT-4 (23:00 Kyiv/MSK).
My best guess is we hear from the SEC around 4pm tomorrow. For spot btc they dropped it at 3:45pm, some others in past were slightly after 4pm. Anything poss tho https://t.co/MzTOcsmTnJ
— Eric Balchunas (@EricBalchunas) May 22, 2024
“[The decision] on spot bitcoin ETFs was published at 15:45, some other announcements in the past were slightly after 16:00, although anything is possible,” he added.
Analysis and Forecasts
Analysts at QCP Capital suggested that ETH prices could rise by 60% — approximately to $6000 — amid potential ETF approvals, considering the market dynamics following the launch of bitcoin ETFs.
“All eyes are on the [SEC] deadline for ETH-ETF, which expires today. On Friday, implied volatility will exceed 100%, the market expects fireworks,” the experts noted.
BlackRock and five other issuers have amended their applications, and the VanEck fund has been included in the DTCC list, noted QCP Capital. Therefore, researchers highly rate the chances of product approval and the launch of trading “as early as next week.”
Meanwhile, CryptoQuant highlighted the significant influence of the ETF narrative and spot purchases on Coinbase on Ethereum’s price.
1. Just before the price surge, deposit transactions to Coinbase significantly increased.
This is typically due to increased demand for spot purchases, leading to more internal and cross-exchange transfers. pic.twitter.com/Ds2iw0Y5KW
— CryptoQuant.com (@cryptoquant_com) May 21, 2024
“Shortly before the price surge, the number of deposit transactions to Coinbase significantly increased. This usually happens due to increased demand for spot purchases, leading to more internal and cross-exchange transfers,” the report states.
According to analysts, on May 21, the volume of spot ETH trading on Coinbase rose to $1.1 billion. The day before, the figure was almost nine times lower ($127.2 million). Within a day, the platform’s share among other CEX doubled — from 5.83% to 11.36%.
However, the company warned of a “significant correction” in the event of a rejection or postponement of the ETH-ETF.
Trader Jelle noted that Ethereum “broke out of a multi-month falling wedge, reclaimed key resistance, and is now moving higher.”
$ETH broke out of a multi-month falling wedge, went on to reclaim the key resistance, and now pushes higher.
ETF decision this afternoon, but the chart looks like it knows the outcome.
Higher. pic.twitter.com/rRJs9thAyf
— Jelle (@CryptoJelleNL) May 23, 2024
“The ETF decision is this afternoon, but the chart looks like it knows the outcome,” he added.
Analysts at Bernstein have predicted Ethereum could rise to $6600 if the instrument is approved.
Several industry experts also suggested increased volatility of the asset amid the ETF narrative.