Key points
- Speculation broke Monday afternoon that the SEC could end up approving a Spot Ethereum ETF, which previously seemed unlikely
- Ethereum prices rose 20% following the news
- The SEC is set to decide Thursday whether the VanEck ETF (and possibly others) will be approved or denied
- While this decision could have implications for US dollar, it is unlikely to significantly shift USD demand in the near term
Ethereum ETF approval odds rise dramatically on SEC rumors
The possibility of Ethereum (ETH) ETF approvals has seen a significant shift, with Bloomberg ETF analyst Eric Balchunas moving his approval odds from 25% to 75% on Monday afternoon following speculation that the SEC has materially changed their stance from a likely 'no'. His latest opinion is that the SEC could preliminarily approve the 19b-4 filings this week, while still granting themselves time to review each application further ahead of S-1 approval. This rumor suggests a dramatic turn in the SEC's approach towards cryptocurrency ETFs, sparking interest among investors about the potential implications for the broader market.
Ethereum prices soared 20% after the news
Following Balchunas's tweet of the ETF approval rumors, Ethereum's price surged by 20% in the day following, reaching $3,800 from a previous $3,150. Prices remain elevated midweek above $3,700. This sustained spike illustrates the market's optimistic response to the news and highlighting the high sensitivity of cryptocurrency prices to regulatory developments as this story shares many similarities to the Bitcoin ETF approval process.
Will ETH ETFs be approved on Thursday?
The SEC faces a looming deadline this Thursday to decide on the VanEck ETH ETF, with implications for several other similar ETFs in line. If VanEck’s ETF gains approval, there could be a domino effect, mirroring the simultaneous approvals observed with Bitcoin ETFs. All registrants have recently amended their applications in adherence to the latest SEC guidelines, which may increase their chances of approval.
What does this mean for the US dollar?
While traditionally there hasn’t been a notable correlation between Ethereum and the US dollar, the potential influx of investments into ETH could exert a slight inverse impact on the dollar’s value. As investors might sell USD to invest in ETH, there could be a minor depreciation in the dollar, especially if enthusiasm around ETH ETFs continues to grow. Similarly, the US dollar could see upside if the ETFs get denied and the price of Ethereum falls. There is also long-term speculation that cryptocurrencies will eventually replace fiat currencies, and an ETH ETF would be a step in the right direction for enhancing cryptocurrency accessibility.
In the short term, however, US dollar prices will likely still have a greater dependence on macroeconomic factors like the cooling US economy and the possibility of lower interest rates this year. It is also possible that these trends, along with growing geopolitical tensions, have an effect on Ethereum demand if investors are dissuaded from entering speculative assets like cryptocurrencies. Even so, approval of an ETH ETF this week could significantly boost Ethereum's price, while a rejection may lead to a sharp decline.
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