Zhitong Finance learned that the US Securities and Exchange Commission (SEC) approved a rule change on Thursday that will pave the way for approval of an Ethereum spot ETF, which is one of the largest cryptocurrencies in the world. The SEC approved Form 19b-4 for several spot Ethereum ETFs, including BlackRock, Fidelity, and Grayscale ETFs. Although these forms have been approved, ETF issuers need their S-1 registration statement to take effect before they can begin trading. The SEC has only recently begun talks with issuers about their S-1 forms, and it's unclear how long this process will take.

Analyst James Seyffart said, “I think if they work really hard, it could be done in a few weeks, but there are plenty of examples in history where this process took more than 3 months.”

The decision comes less than six months after the SEC approved a Bitcoin spot ETF. These funds have proven to be a huge success for the industry, and the net inflow of these funds has already surpassed $12 billion, according to FactSet.

Late May has been considered a potential approval date for an Ethereum spot ETF because it coincides with the SEC's deadline to decide whether the Vaneck Ethereum ETF can continue. Many issuers — including BlackRock, Bitwise, and Galaxy Digital — have also begun the process to launch an Ethereum fund.

Specifically, the SEC order approved listing applications for eight different Ethereum funds from various exchanges. Technically, the directive does not approve the fund itself, nor does it set a date for ETFs to begin trading.

The price of Ethereum only increased by 2%, but due to market expectations for Thursday's decision, the price of Ethereum is up 20% from earlier this week. Some investors may also be suspended because SEC approval of rule changes does not guarantee that all funds will be launched.

Ethereum spot ETFs are expected to be smaller than Bitcoin spot ETFs, at least initially. The Grayscale Ethereum Trust currently has around $11 billion in assets, far less than the size of the company's Bitcoin fund before approval. The approval of an Ethereum spot ETF indicates that the SEC's stance on cryptocurrencies may be softening after a series of legal disputes. The agency lost a lawsuit against Grayscale in 2023, prompting approval for Bitcoin products.

The SEC's efforts to regulate cryptocurrencies have also received close attention from politicians. The US Senate passed a resolution last week to withdraw the SEC's staff announcement on digital asset accounting rules.

Purchases are expected to increase dramatically, and Ether may usher in 60% room to rise

Ethereum is the second-largest crypto asset and has become a blue chip along with Bitcoin, although its value proposition is clearly different. Although Bitcoin is mainly viewed as a long-term store of value, investing in Ethereum is more like investing in early-stage technology. Ethereum powers the Ethereum network, which powers different applications such as decentralized finance (DeFi) projects, irreplaceable tokens (NFTs), or the tokenization of real-world assets such as commodities, securities, art, and real estate.

Richard Kerr, a partner at law firm K&L Gates, said the application approved on Thursday did not apply to other crypto projects on the Ethereum network. “If an Ethereum product is approved, it doesn't mean that similar products for other digital assets on the Ethereum platform will also be approved,” Kerr said.

Ethereum also provides the opportunity to place bets, which is a way for investors to earn interest on holding Ether by locking tokens on the network for a period of time — although US Ethereum spot ETFs may not participate. The SEC alleges in the lawsuit against Coinbase (COIN.US) and Kraken that the products that provide betting services are unregistered securities. Ark, Fidelity, and Grayscale updated their files this month to remove betting items from their proposals.

Steven Lubka, managing director of Swan Bitcoin and head of Swan Private, said that lack of investment in ETF products is another reason why demand for Ethereum spot ETFs may be lower than Bitcoin ETFs. “These numbers won't match Bitcoin ETF inflows, and there are some structural differences in the product, which makes it less attractive overall,” Lubka said.

Despite this, the approval of an Ethereum spot ETF will still bring in significant capital inflows. On Thursday, the report indicated that if Ether can emulate Bitcoin's gains driven by ETF approvals since January, it could usher in a sharp rise. Currently, US regulators are deciding whether to approve the country's first Ether spot ETF, and all eyes are on the second-largest cryptocurrency. According to an article published by cryptocurrency trading firm QCP Capital on Telegram, this could push the cryptocurrency token up 60%.

As the ruling deadline approaches, the SEC is expected to publish the ruling as early as this week. Reports that the agency is inclined to approve these applications came as a surprise to the market, and since Monday, Ether has risen by almost 22%.

QCP Capital wrote in the article: “The implied volatility was over 100% last Friday, and the market is expected to fluctuate sharply. BlackRock and five other issuers have amended their ETF documents to the SEC, while Vaneck's ETF has been listed on the Depository Trust and Settlement Corporation (DTCC). We think approval is likely now, and trading is expected to begin as early as next week.”

Citing the success of the Bitcoin ETF, the agency predicted that Ether would rise 60%. The forecast is based on the fact that in mid-January, the SEC also approved a spot Bitcoin ETF. Since then, the cryptocurrency has broken through a record high of more than $73,000, although gains have declined somewhat since then.

As a result, there was also a significant increase in Ether purchases this month. Since May 1, CryptoQuant data shows that Ether recipient purchases (that is, the amount of cryptocurrency purchased from sellers on exchanges) have increased 85%. Wall Street is optimistic about a new round of ETF-led cryptocurrency gains, which has rekindled bullish expectations for Ether and Bitcoin. Standard Chartered Bank, for example, confirmed that Ether could reach $8,000 by the end of this year, further boosting Bitcoin's target of $150,000.