After years of waiting, the U.S. Securities and Exchange Commission (SEC) finally approved several spot Bitcoin ETFs (exchange-traded funds). This opened up Bitcoin to several large institutions and overall gave a statement that it was a legitimate asset to be taken seriously. While anticipation for this approval certainly raised prices, the party might not be over just yet with another ETF looming on the horizon. Is a spot Ethereum ETF next on the SEC's approval list?

What are ETFs 

Exchange Traded Funds (ETFs) are a type of investment product which holds a collection of different assets like stocks or commodities. ETFs can hold a basket of different securities or track the price of a specific asset like Gold or Bitcoin. They trade on stock exchanges making them highly regulated and accessible to different investors. 

The Role of Bitcoin Spot ETFs

Although Bitcoin futures ETFs have been out since 2021, market participants have been clamoring for years to get a spot Bitcoin ETF approved. One reason for this is that a spot ETF requires the provider to actually buy and hold the underlying asset rather than just track the price. Major funds like Blackrock and Ark Invest needed to accumulate Bitcoin prior to releasing their ETFs, thus possibly contributing to liquidity and the recent rally Bitcoin had from $24k to $49k. Another benefit of spot Bitcoin ETFs would be to provide traditional investors and large firms with a more familiar investment vehicle. Storing Bitcoin and other cryptocurrencies requires a level of technical expertise that some people just aren't up to. Furthermore, just having spot ETFs of cryptocurrencies contributes to their broader acceptance. The SEC's approval of spot ETFs signifies a level of legitimization for Bitcoin which could contribute to its credibility and attract more people in the crypto space. Public interest could also be clearly seen with just the first trading day of the newly approved spot Bitcoin ETFs having over $4 billion dollars in volume. 

Possibility of an ETH ETF 

With spot Bitcoin ETFs approved, it was only a matter of time before the second largest cryptocurrency would get the spotlight. BlackRock's CEO Larry Fink even recently stated that "I see value in having an Ethereum ETF. As I said, these are just stepping stones towards tokenization," just after their spot Bitcoin ETF began trading. Several asset managers have already filed for an spot Ethereum ETF such as BlackRock, Ark Invest/21 Shares, Fidelity, and VanEck. Given that a few of these filings have an approval deadline this coming May 2024, many speculate that a spot Ethereum ETF is coming soon. A spot ETF approval for Ethereum may signal a boom not just for Ethereum but for crypto as a whole. However, approval of a spot Ethereum ETF may be more problematic than that of Bitcoin due to some concerns with ETH being a potential security.

SEC's view on Crypto ETFs  

In the end, it's still going to come down to the SEC whether or not to approve a spot Ethereum ETF. Gary Gensler, current SEC chairman, is notorious for his overly restrictive stance on the crypto space with him categorizing almost all cryptocurrencies to be securities. Although seen in a video back in 2018 stating that ETH wasn't a security, Gary hasn't said much about his old view in recent days. In fact, when asked if the approval of spot BTC ETFs could lead to other spot ETFs like one for Ethereum, Gary said "..today's Commission action is cabined to ETPs holding one non-security commodity, Bitcoin. It should in no way signal the Commission's willingness to approve listing standards for crypto asset securities."

While Gary's statement certainly isn't one of high spirits, high investor demand and developments in their other crypto-related lawsuits like with Ripple and Grayscale could still tilt the SEC's decision. Nothing is a certainty in this market but the fact that we've even got to the point of talking about the possibility of a spot Ethereum ETF shows that the space is evolving and crypto seems here to stay.