The transition to Proof of Stake (PoS) has brought significant regulatory scrutiny to Ethereum. The Chairman of the SEC announced intentions to classify Ethereum as a security, and U.S. cryptocurrency exchanges have received pre-litigation warnings regarding their staking programs. According to CoinFactiva analysts, this regulatory pressure in crypto industry has negatively impacted Ethereum’s investment appeal and price dynamics, with the altcoin losing 35% against Bitcoin since September 15, 2022.
However, several key developments in 2023 forced the regulator to reconsider its stance. Grayscale’s notable legal victory in converting the GBTC trust fund into a spot ETF, the complexities in distinguishing between commodities and securities, and the presence of cryptocurrencies in U.S. presidential candidates’ platforms all played a part. On June 13, during a Congressional hearing, SEC Chairman Gary Gensler announced that final approval for an Ethereum ETF would occur this summer, pending necessary amendments.
On the same day, long-term holders (addresses with two incoming and no outgoing transactions) purchased 298,000 ETH, worth over $1 billion. Julio Moreno, head of research at CryptoQuant, noted this as the second-largest spike in interest since September 11, 2023.
Bloomberg analyst Eric Balchunas reported on social media platform X that the new requirements are straightforward, and applicants are expected to adjust their filings shortly. He suggested that the approval might come on July 2, just before Independence Day celebrations.
Ten contenders have filed for the launch of spot ETFs, including BlackRock, the world’s largest asset management company not only in crypto industry but in general. However, particular attention is on Grayscale’s ETHE fund, set to be converted from a trust. The probability of approval significantly increased on May 20 when the SEC, after a long silence, called for application adjustments. On the same day, investors began buying ETHE shares, as the discount relative to the underlying asset exceeded 20% in mid-May.
A similar scenario unfolded with the conversion of Grayscale’s Bitcoin trust fund GBTC. Post-conversion, assets were unlocked, and investors started taking profits, causing Bitcoin to correct by 21% in January, despite the long-term positive impact. CoinFactiva analysts found the proof of this statement in data below:
ETHE holds 2.9 million ETH, valued at $10 billion. A similar sell-off of Ethereum shares could lead to a correction, even though the event itself is positive for all crypto enthusiasts. The substantial growth in ETF investments will be restrained by the absence of staking (a requirement imposed by the SEC).
Conclusion
According to CoinFactiva analysts, the approval and launch of Ethereum ETFs are likely to bring initial enthusiasm and a surge in purchases. However, historical precedents suggest that such events also lead to profit-taking and market corrections. Investors should be cautious of potential volatility and regulatory constraints that might impact Ethereum’s price trajectory in the short term.
