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Analyzing The Investment Potential Of The Cryptocurrency ETFs

By Eric George


Reviewed by: Eric George


Cryptocurrency ETFs

Recently we have come across the news of the victory of the case made by popular cryptocurrency asset management firms like “Greyscale”, “Black Rock”, “Fidelity” and 5 others in their case against the U.S. Securities Exchange Commission regarding the approval and listing of Spot Ethereum Exchange Trade Fund (ETF).

The current verdict has led to a lot of movement in the market about the future of Ethereum-based ETFs and the timing of their listing.

In this article, we will look at what cryptocurrency ETFs are, why their approval was withheld by the U.S. Securities Exchange Commission, and how the recent verdict will impact the price of Ethereum coins and the prospects of Ethereum ETFs and other similar funds in the market.

Future of ETFs in the Cryptocurrency Market

As per the speculations from major analysts, the Ethereum ETFs are expected to follow a trajectory similar to Bitcoin ETFs, which launched earlier in January 2024. These Bitcoin ETFs significantly increased short-term Bitcoin holdings and resulted in substantial gains over a brief period.

Cryptocurrency ETFs

Currently, Bitcoin ETFs have emerged as a dominant force with holdings that exceed over $70 billion which is equivalent to 5% of the total Bitcoin supply.

Similarly, the same increase in the volume of trade and price is expected with Ethereum ETFs taking into account the potential for institutional adoption and increased confidence in the fund.

In the following section, we will look at what ETFs are and how they came to be in the spotlight for criticism from the U.S. Securities and Exchange Commission.

What are ETFs and why were they under scrutiny from Security Exchange Commissions (SEC)?

ETFs were launched to offer a way for investors to gain exposure to cryptocurrencies without actually buying and storing the tokens themselves.

Cryptocurrency ETFs work by trying to replicate how indexes work by keeping a diversified portfolio of various crypto assets.

ETFs like spot ETFs hold the cryptocurrency directly to build a portfolio that replicates the performance of the asset in real markets.

These ETFs reflect share prices that mimic the changes it’s values with the price of the derivatives rather than from the actual price of the asset.

The discrepancies that occurred between the real price of the asset and the value of the ETFs that held them were one of the reasons for the increased scrutiny that they faced from the U.S. Securities Exchange Commission.

Another reason for their criticism was due to the fear of the market instability that these ETFs could cause due to price fluctuations and volume increases.

Now that we have discussed what ETFs are and how they function we will look at what impacts this news had on the Bitcoin and Ethereum market.

What are the impacts the Verdict had on the Cryptocurrency Market?

With the announcement of approval for Spot Ethereum ETF on 23rd May 2024 the market price of Ethereum reached a new high of $3,927 as of 27th May 2024.

The reason for this price increase is twofold. The first is the increased interest trust that the investors show in the coin and the second is the increase in the amount of volume of ETH that is currently on demand in the market after the announcement.

The major crypto analysts are hopeful for a bullish run of Ethereum ETH with more backing from the recent comments from the SEC chair Gensler saying that the ETF S-1 approvals should likely be done with “over the course of this summer”.

The finalization of the verdict will most likely push Ethereum to become a close competitor to Bitcoins and will solidify the market position of ETFs for a long time to come.

Final Thoughts

We have discussed how cryptocurrency ETFs work and how they work in relation to the cryptocurrency markets.

As we can see from the detailed market sentiment toward ETFs, their potential for growth, and the wider availability that they provide to their holders and buyers ETFs might be a suitable option for trade for all those who are looking to take a dip into the world of cryptocurrency world without any intention of taking too much risk on trading with cryptocurrencies directly.

ETF seems to provide a great option for long-term and short-term speculators as a testing field for cryptocurrencies while making the process of trading in crypto markets as risk-free, convenient, and as accessible as possible.

Eric George

Eric George, a retired journalist, focused primarily on market research and current tech trends. With a career spanning news media, he made significant contributions to understanding the intersection of technology and finance. Today, he continues to engage with these topics in various capacities

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