U.S. SEC grants preliminary approval for Ether ETFs set to launch on July 23
- The U.S. SEC has given preliminary approval to at least three of the eight asset managers planning to launch Ether ETFs, allowing them to start trading on 23 July. This approval depends on the submission of final offering documents.
- According to Bitwise CIO Matt Hougan, Ether ETFs could have a more significant impact on Ether's price compared to Bitcoin ETFs.
- Similar to the outflow from Grayscale's BTC ETF during its conversion, the ETH ETF, with its higher 2.5% management fee compared to the typical 0.2%, is likely to experience a $10 billion sell pressure.
- Kar Yong Ang, Octa analyst, believes that modest inflows are expected before investors exit Grayscale, leading to a potential sell-the-news event.
According to three industry sources, the U.S. Securities and Exchange Commission has granted preliminary approval to at least three of the eight asset managers planning to launch exchange-traded funds linked to the spot price of ether, allowing them to start trading on 23 July. This approval is contingent on the applicants submitting final offering documents to regulators, with one source indicating that all eight are expected to launch simultaneously.
United States spot Ether exchange-traded funds will have a rough start but could have a bigger impact on the asset's price than Bitcoin ETFs did for BTC, according to Bitwise Chief Investment Officer Matt Hougan.
Hougan provided three main reasons why he believes Ether ETFs will have a greater impact on the asset's price:
1. Ether's effective inflation rate is zero due to the extensive use of Ethereum-based applications compared to the small amount of ETH created daily.
2. Bitcoin miners need to sell Bitcoin to cover operational costs, which are high due to expensive computer chips and significant energy requirements. In contrast, staking ETH has no substantial direct costs.
3. Approximately 28% of all ETH is staked and locked away. ‘Currently, 28% of all ETH is staked, meaning it is effectively off the market,’ Hougan said.
‘The first few weeks could be choppy, as money may flow out of the $11 billion Grayscale Ethereum Trust (ETHE) after it converts to an ETP,’ Hougan stated. ‘By year-end, I’m confident the new highs will be in,’ he added, emphasising not to expect significant results ‘immediately’ given the potential selling pressure similar to what spot Bitcoin ETFs experienced.
‘Do you remember the outflow from Grayscale BTC ETF during conversion due to high management fees? Now, a similar situation is happening with their ETH ETF. Most have a 0.2% management fee, but Grayscale charges 2.5%. Expect a $10 billion sell pressure on ETH, with likely modest inflows before everyone exits Grayscale. Anticipate a sell-the-news event,’ said Kar Yong Ang, Octa analyst.