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Ethereum Investors Just Received Some Bullish News
Find out how Ethereum’s latest development could transform your cryptocurrency investing strategy.
Bitcoin (BTC 2.45%) Investors may remember a beautiful Wednesday last January, when the first exchange-traded funds (ETFs) based on Bitcoin spot prices hit Wall Street.
It was a memorable moment that had been in the making for years.
How Bitcoin ETFs Reshaped the Market
The Winklevoss Twins of Facebook fame filed the first application for a spot Bitcoin ETF way back in 2013. The Securities and Exchange Commission (SEC) rejected that application five years later, but the idea of Bitcoin ETF Spots persisted.
The SEC eventually caved to investor pressure and a torrent of ETF applications, approving the first Bitcoin futures funds in 2021. Correct spot price ETFs arrived on January 10, 2024.
Led by the popular iShares Bitcoin Trust (IBITS 5.32%) and the converted mutual fund Grayscale Bitcoin Confidence (GBTC 5.18%), 11 cryptocurrency ETFs entered the market that day. They have all gained about 40% since then, well ahead of the S&P 500 Index 14% gain for the index. Prominent Growth Investor Cathie Wood These funds are expected to attract a lot of institutional investors to the cryptocurrency market, causing Bitcoin prices to increase significantly over time.
And now it is Ethereal‘S (ETH 1.98%) turning point.
This week, the SEC finally approved some spot Ethereum ETFs, which should have a similar long-term effect on the second-largest cryptocurrency.
The Path to Ethereum ETFs
Like Bitcoin ETFs, the road to Ethereum ETFs has been long. Grayscale began testing an Ethereum ETF in 2017, launching Grayscale Ethereum Trusts (ETHE 4.84%) as a mutual fund in the summer of 2019. Other firms have slowly followed. Futures funds got there first, and demand for spot-priced Ethereum ETFs began to pile up last fall.
The SEC took an important step in Maygenerally allowing various exchanges to trade Ethereum-based ETFs as commodities. Each application still had to be vetted in detail, delaying the launch of actual ETFs by a couple of months.
But the job is done and the SEC has approved nine spot Ethereum ETFs. Grayscale’s mutual fund has been converted into a more investor-friendly ETF with $7.5 billion in assets under management (AUM).
THE iShares Ethereum Fiduciary ETF (Age’ 4.94%) is obviously an early favorite, given the household name status of the iShares family and the backing of the financial giant Black rockAll of them offer discounts on commissions to increase the interest of early investors.
So it’s a pretty direct replication of the Bitcoin ETF launch in January. The iShares Bitcoin Fund has amassed $10 billion in invested funds faster than any ETF in the history of exchange-traded funds. Together, the 11 Bitcoin ETFs now hold $60 billion in cryptocurrency assets. And as I said, they’ve delivered market-beating returns, tracking the underlying commodity perfectly over the past six months.
Market turbulence and future prospects
Ethereum ETFs launched amid a tumultuous market week. The stock market is down, driven by political turmoil, surprising economic reports, and unpredictable results from the newly started earnings season. The turmoil has spilled over into the cryptocurrency market, sending Bitcoin and Ethereum sharply lower. The new ETFs have so far failed to provide much value to investors.
But then the same thing happened in January. Bitcoin and its new ETFs fell as much as 16% in the first three weeks before recovering.
If I could bring Cathie Wood back into the analysis, she didn’t care at all about the initial drop in the price of Bitcoin.
“We’re very excited that Bitcoin is now available in an ETF wrapper, and therefore very accessible at very low prices,” Wood said in a CNBC interview in late January, near the bottom of the ETF’s post-launch price decline. “We think this is one of the most important investments of our lives.”
The same logic should apply to this week’s Ethereum ETF launches. If Bitcoin is the digital equivalent of physical gold that brings wealth, Ethereum’s smart contracts appear poised to revolutionize financial systems and the way ownership of real-world assets is tracked.
Ethereum ETFs offer a safer, more familiar way to invest in cryptocurrency. By investing through established financial institutions, investors can benefit from the protections and oversight that come with regulated markets, reducing the risks associated with direct cryptocurrency ownership. And in the long run, inviting large groups like retirement accounts and professional money managers into the cryptocurrency market can only be a positive thing for The long-term value of the cryptocurrency Ethereum.
Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of the board of directors of The Motley Fool. Anders Bylund has positions in Bitcoin, Ethereum and Grayscale Bitcoin Trust (BTC). The Motley Fool has positions in and recommends Bitcoin, Ethereum and Meta Platforms. The Motley Fool has a disclosure policy.