The Securities and Exchange Commission’s (SEC) approval of spot bitcoin (BTC-USD) earlier this year was a watershed moment in the cryptocurrency community. What about the second-most popular cryptocurrency though? When will the SEC approve spot Ethereum (ETH-USD) ETFs?
That’s the billion-dollar question as Ethereum bulls eagerly await a potential SEC ruling that could soon enable substantial inflows of capital into the crypto space. Something’s definitely happening, with the price of ether soaring and trading volumes going through the roof.
As a result, many investors may be wondering whether a bullish catalyst may be right around the corner.
Why did Ethereum jump 23%?
The financial markets are highly efficient in the 2020s. This includes the cryptocurrency markets, which trade 24 hours a day, seven days a week.
When news spreads, it spreads quickly, and the markets respond immediately. The markets are also forward-looking, with financial traders trying to anticipate news events even if they’re still in the rumor/ speculation phase.
This phenomenon can be magnified with cryptocurrencies since overnight trading enables a news item to spread overnight without any breaks in trading. All of these contributing factors precipitated a jaw-dropping rally in bitcoin on Monday night and Tuesday morning, pushing the token’s price above $71,000 before it pulled back slightly.
However, bitcoin wasn’t the star of the show this time as Ethereum’s 23% rally dwarfed bitcoin’s 5% to 8% price move. This was ether’s biggest 24-hour price move in a long time, with the coin touching $3,800 on unusually heavy trading volume.
As you may have guessed by now, the price move had something to do with the SEC’s long-awaited potential approval of one or more spot ethereum ETFs. However, it’s a “down to the wire” call now because the SEC hasn’t (as of this writing) made a final decision on spot Ethereum ETFs.
Moreover, the SEC has a final deadline of May 23 to rule on VanEck’s application for a spot Ethereum ETF. It wouldn’t be the end of the world if the SEC rejects the firm’s application, but an approval would set a precedent and likely open the floodgates to more approvals.
On the other hand, if there’s no final decision from the SEC yet, why would the market panic-buy ether in advance?
Again, it’s because the cryptocurrency market is extremely efficient and forward-looking, so even a hint or rumor is enough to set off a massive price move.
In this instance, the major catalyst was a posting on X from Bloomberg Senior ETF Analyst Eric Balchunas:
There’s a lot to unpack here. According to the X posting, Balchunas and fellow Bloomberg commentator James Seyffart heard “chatter” that the SEC “could be doing a 180” on the issue of approving spot ethereum ETFs.
Around the same time as Balchunas’ X posting, CoinDesk published a report citing “three people familiar with the situation” and stating that the SEC had asked exchanges to update their 19b-4 filings “on an accelerated basis.”
As you might imagine, this report added fuel to the burning fire of speculation and precipitated the ethereum-price rally.
A caveat for would-be Ethereum millionaires
At this point, it may be tempting to mortgage your home and go all in on ether. However, I certainly don’t recommend doing this, and while it’s fine to speculate on a small ether position, there is a major caveat to take note of.
The aforementioned CoinDesk report cautioned that the SEC won’t necessarily approve spot ethereum ETFs.
“Would-be issuers also need their S-1 applications approved before the products could begin trading,” CoinDesk clarified.
Furthermore, the SEC “could take an indefinite amount of time to approve the S-1 documents… as it isn’t tied to a deadline,” CoinDesk added.
Frankly, everything about this news story sounds “iffy” and speculative.
For example, CoinDesk wrote, “One company in talks with the SEC said it feels like it might be on the right track for approval, in a turnaround from feeling some weeks ago that the SEC was dragging its feet, according to a person familiar with the matter.”
Placing a large Ethereum trade based on “feelings” (citing CoinDesk) and “chatter” (citing Balchunas’ X posting) isn’t necessarily a wise choice for serious investors. Again, keeping any position small is a wise choice — if you choose to invest at all.
Finally, it’s also worth considering that, after a 23% rally, the market may have already priced the best-case scenario into ether. Investors are advised to keep that in mind before pursuing get-rich-quick crypto trades and Ethereum-millionaire dreams.
