Ethereum ETF Approval: A Milestone in Crypto and Regulatory Transformation

The crypto world is buzzing with the monumental news of the U.S. Securities and Exchange Commission’s (SEC) approval of spot Ethereum (ETH) exchange-traded funds (ETFs) last week. This follows the SEC’s approval of spot Bitcoin (BTC) ETFs in January.

The approval of the spot Ethereum ETFs is not only a pivotal moment for Ethereum but also a reflection of the shifting regulatory and political landscape surrounding cryptocurrencies.

Let’s take a comprehensive look at the journey from the initial ETF applications to this landmark approval and the broader implications for the crypto market.

The Road to SEC Approval

The story of the Ethereum ETFs began years ago, and institutions have been waiting for a piece of the crypto trading action. However, this recent batch of Ethereum spot ETF applications was submitted in the fall of 2023. The financial institutions that have sought approval aim to offer a regulated and accessible way for investors to gain exposure to Ethereum.

These applications faced numerous hurdles, primarily due to the SEC’s stringent scrutiny and wariness toward cryptocurrencies. The road to approval was long and fraught with rejections and requests for additional information.

The breakthrough came with the approval of spot Bitcoin ETFs, which set a precedent and provided a clearer regulatory framework for other cryptocurrencies to follow. The approval of the Bitcoin ETFs demonstrated the SEC’s growing comfort with digital assets and their potential integration into the traditional financial system.

This development was a critical step that paved the way for subsequent Ethereum ETF applications to gain serious consideration.

Market Impact of Bitcoin ETF Approval

The approval of the Bitcoin ETFs had a profound impact on the crypto market. It not only legitimized Bitcoin in the eyes of mainstream investors but also catalyzed significant capital inflow into the cryptocurrency market.

Bitcoin prices surged as the ETF provided a new, regulated avenue for institutional and retail investors to invest in Bitcoin without the need to directly purchase and store the cryptocurrency. The spot Bitcoin ETFs of 2024 were some of the most successful ETF launches in history.

The success of the Bitcoin ETFs underscored the demand for regulated crypto investment products and set the stage for other digital assets, including Ethereum, to follow suit. The anticipation for an Ethereum ETF grew, with market participants eagerly watching for regulatory developments that would signal the next big leap in crypto investment opportunities.

The Approval of the Ethereum ETF

The approval of the Ethereum ETF last week represents a landmark moment for the cryptocurrency market. The journey to this approval was influenced by a combination of market maturity and significant shifts in the regulatory and political environment.

Things really started to change when former President Trump held a meeting with crypto industry experts on May 10. Crypto policy evolved very quickly after that event.

Last Monday, two Bloomberg analysts increased the odds of the Ethereum ETF approval from 25% to 75%. Their move was based on insider information from the SEC that indicated a favorable shift in their stance.

This news sent Ethereum prices soaring, with a 20% surge in a single day, reflecting the market’s optimism and anticipation. ETH has been trading right around the $3,700 to $3,800 range since the news broke.

The approval was confirmed on the evening of May 23, marking a historic achievement for Ethereum and the broader crypto ecosystem.

Shifts in Regulatory and Political Attitudes

The Ethereum ETF approval did not occur in a vacuum. It was accompanied by notable changes in the regulatory and political attitudes toward cryptocurrencies. For years, the crypto market has navigated a hostile environment, characterized by stringent regulations and enforcement actions by the SEC under Gary Gensler’s leadership.

This hostility was epitomized by the SEC’s resistance to approving crypto ETFs and aggressive scrutiny of crypto firms. Crypto insiders have long complained that the SEC failed to protect investors from firms such as the now-defunct FTX but sued honest companies such as Coinbase (COIN) and Kraken.

However, in recent weeks we’ve seen a dramatic shift. Following a pivotal meeting between former President Trump and crypto industry insiders, the Biden administration signaled a change in its approach to cryptocurrencies.

This shift was further evidenced by the SEC’s more conciliatory tone and the resignation of Federal Deposit Insurance Corp. (FDIC) Chair Martin Gruenberg, a known adversary of the crypto industry.

Gruenberg’s departure, reportedly due to creating a hostile work environment, was seen as a significant win for the crypto community. His exit, coupled with the administration’s new directives, suggests a more favorable regulatory landscape moving forward.

This change in attitude has been reinforced by policy updates, including the Biden administration’s decision to accept crypto donations, mirroring a similar move by the Trump campaign.

The Road Ahead

The approval of the Ethereum ETFs marks a new era for cryptocurrency investments, providing investors with a regulated and accessible way to invest in Ethereum. This development is expected to bring significant capital inflow into Ethereum, driving its price and market adoption.

The capital inflows from the spot Bitcoin ETFs powered a move that sent BTC from prices around $40,000 to the yearly high of $73,000. Should the Ethereum ETFs capture even a fraction of that volume, it could rocket in price.

Moreover, the recent political and regulatory shifts suggest a more supportive environment for cryptocurrencies. With less hostile regulatory headwinds and a more open stance from key regulatory bodies, the crypto market is poised for continued growth and innovation.

Keep in mind that the entire move from the 2022 lows to the current crypto prices was made while dealing with harsh regulators and a hostile political front. It appears that those headwinds may have been removed as we proceed through the rest of this crypto bull market.

In conclusion, the Ethereum ETF approval is a milestone that underscores the maturation of the crypto market and the evolving regulatory landscape. As the industry continues to gain legitimacy and acceptance, investors can look forward to a more integrated and dynamic financial ecosystem where digital assets play a crucial role.

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This article previously appeared on Investing Daily.