Many Spot Ether Exchange Traded Funds (ETFs) Will Likely Begin Trading Tuesday, July 23, 2023

Ether (ETH) is the underlying cryptocurrency of the Ethereum network, which is the second-largest crypto network when measured by market cap.

Several spot ether exchange traded funds (ETFs) are set to begin trading Tuesday, July 23, after receiving final approval from the U.S. Securities and Exchange Commission (SEC).

Ether (ETH) is the native cryptocurrency of the Ethereum network, which is the second-largest crypto network when measured by market capitalization.

As of Monday evening, the following spot ether ETFs had effective prospectuses, indicating approval from the SEC to begin trading:

Notably, updated filings for Grayscale Ethereum Trust (ETHE) and Grayscale Ethereum Mini Trust (ETH) were yet to be published at the time of writing.

Ether was trading about 2% lower in Monday's session.

Optimism Around Spot Ether ETFs

Spot bitcoin ETFs, which began trading in January, have fueled demand for bitcoin (BTC) and were partially responsible for sending bitcoin to record-highs in March.

According to Bloomberg Intelligence analyst James Seyffart, spot ether ETFs are likely to see around 20% to 25% of the flows spot bitcoin ETFs saw in their first few months of existence.

In recent commentary, Bitwise Chief Investment Officer Matt Hougan wrote that ether ETFs could drive ether prices to a record above $5,000. Hougan has predicted that the new ETFs will garner up to $15 billion in new assets over 18 months.

Questions Around Staking Remain

The Ethereum blockchain utilizes a proof-of-stake consensus mechanism for its operations, such as reconciling and recording transactions on the network.

In contrast to the proof-of-work mechanism employed by the Bitcoin network, where millions of nodes compete for rewards for being the first to verify blocks, Ethereum employs a different approach. Staking is a process where ether holders pledge their crypto tokens to 'validators' who participate in the transaction verification. Ether owners earn a reward in exchange for locking up their tokens.

The SEC has previously raised the question of whether ether is a security under its jurisdiction, although it has not explicitly classified it as such. Meanwhile, the Commodity Futures Trading Commission (CFTC) classifies both bitcoin and ether as commodities.

The reason for this classification is important because the SEC has also considered staking to be a securities offering in the past. Recently, the SEC sued blockchain technology firm Consensys for offering access to staked ether through its MetaMask wallet.

Hence, it is likely that none of the spot ether ETFs will be able to stake the ether they hold, at least for now, even at the cost of higher returns for investors.

"I think certainly something like staking, or any feature of the product—we saw that on the bitcoin exchange traded products too, there were features of the product that some people would have liked to see included but weren't, those are always open for reconsideration as far as I'm concerned," SEC Commissioner Hester Peirce told Coinage media in an interview.

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