The price of Ether, the second-largest cryptocurrency by market value, has surged on optimism about regulatory approval for spot exchange-traded fund applications, the first of which is due this week.
The digital token surged by 24 per cent over the past 60 hours – and 66 per cent so far this year – and was trading at about $3,746 at 10am UAE time on Wednesday.
Ether is the native token of the Ethereum blockchain.
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Approval for the Ether spot ETFs could give the cryptocurrency a better reach among big investors and an easier inclusion in traditional investment portfolios, said Ipek Ozkardeskaya, senior analyst at Swissquote Bank, adding that the move is similar to the one seen at the end of last year on spot Bitcoin ETFs.
Ether prices began to take off on Monday after Eric Balchunas, a Bloomberg analyst, increased his estimated probability of the ETF being approved by May 23 to 75 per cent, from 25 per cent currently.
Mr Balchunas said that the Securities and Exchange Commission was reportedly asking exchanges such as the New York Stock Exchange and Nasdaq to update their filings.
On May 20, Bloomberg analysts James Seyffart and Mr Balchunas said on posts on X that the SEC might be “doing a 180” on their expected denial of spot Ether ETFs this week.
The price surge was driven by reports that the SEC had requested key document updates from potential ETF issuers and exchanges.
“Crypto prices have rallied strongly since the end of last week, as institutional investors disclosed their digital assets holdings, Bitcoin spot ETFs recorded renewed inflows, and chances for an approval of spot Ethereum ETFs in the US increased considerably,” Manuel Villegas, digital assets analyst at Julius Baer, said on Wednesday.
“Chances for an Ethereum ETF skyrocketed after the exchanges amended their filings on a last-minute basis. Two asset managers are expecting an answer from the US SEC by the end of the week, again putting a potential approval into the spotlight.”
The SEC requested the NYSE and Cboe Global Markets to update 19b-4 filings that propose rule changes to allow the planned funds to trade, a Bloomberg report said on Wednesday.
“While the regulator asking for an update is not a sure message of approvals being in place, it nevertheless signifies the seriousness of the US regulators in streamlining the crypto investment framework,” said Arun Leslie John, chief market analyst at Century Financial.
The regulator has specifically asked the entities to provide the data at a quick pace before the May 23 deadline, he said.
“Ethereum’s gains came after Bloomberg analysts revised their predictions regarding the possibility of the SEC approving the launch of Ethereum spot ETFs in the US to 75 per cent, from 25 per cent,” said Samer Hasn, market analyst at multi-asset broker XS.com.
“These developments were able to lift Ether from the $3,000 level, which it had been struggling to maintain throughout recent weeks, to $3,700 within a few hours.”
The possibility of the authority rejecting these applications still exists, said Mr Hasn.
This is in addition to the possibility of delaying the decision to take more time to study the applications, due to the different nature of Ether when compared with Bitcoin, he added.
Filings from the SEC and public statements from commission chairman Gary Gensler previously suggested that the regulator may have been preparing to deny spot Ether ETF applications.
The SEC must decide whether to approve or deny investment manager VanEck’s spot Ether ETF before May 23.
Other spot Ether ETF applications awaiting a decision from the SEC include Ark 21Shares, Hashdex, Invesco, BlackRock and Fidelity.
Updated documents were posted late on Tuesday, including for ETFs from Ark 21Shares, Fidelity Investments, Invesco, Franklin Resources and VanEck, Bloomberg reported.
Fidelity Investments on Tuesday updated its S-1 registration statement with the SEC for its proposed spot-Ether ETF, according to Bloomberg.
ETFs are popular with retail investors because of their cheaper fees and easy access to a range of diverse assets, enabling them to self-manage their portfolios.
“However, investors would be wise to know that the SEC is still debating whether to classify Ether as a security. Should it be classified as one, all entities, including providers, storage custodians, brokers and investors, must register with the SEC,” Mr Leslie John said.
“Such an announcement could see investors dumping Ether as a knee-jerk reaction.”
In January, the SEC faced a similar deadline for spot Bitcoin ETFs and ended up approving 11 of the funds simultaneously.
This week, the same five SEC commissioners who voted on spot Bitcoin ETFs are set to cast their votes to either approve or deny VanEck’s spot Ether ETF on May 23, industry tracker Cointelegraph reported. This includes Mr Gensler, the SEC chairman.
The batch of new US Bitcoin ETFs have attracted about $13 billion in net inflows to amass nearly $59 billion in assets since their launch on January 11, according to Bloomberg data.
It has been a tumultuous few years for the global digital asset sector, which entered a “crypto winter” in 2022 after the collapse of a number of large platforms including Celsius, Three Arrows Capital and Sam Bankman-Fried's FTX.
The collapse of FTX, once valued at $32 billion, is the highest-profile cryptocurrency exchange failure to date, after traders pulled $6 billion from the platform in three days and rival exchange Binance abandoned a rescue deal.
Mr Bankman-Fried was sentenced to 25 years in prison in March for his role in the collapse of FTX. He was convicted in November of fraud and conspiracy after being accused of stealing $8 billion from customers.
