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Ethereum (ETH) is down roughly 2.5% over the past 24 hours—after slipping about 4.4% at one point—despite receiving some good news yesterday evening. On Thursday, the U.S. Securities and Exchange Commission, or SEC, approved a rule change that will allow certain exchanges to list and trade spot Ethereum ETFs.
While this initial approval represents a win for Ethereum and the crypto industry as a whole, some uncertainty still lingers. The ETFs themselves need to go through several other rounds of approvals before they can officially start trading. This process could take weeks, which may be the cause for the lackluster response among investors.
This latest downtrend comes after a week of steady increases as investors awaited the SEC’s decision. In fact, Ethereum is still up more than 20% over the past seven days, even with today’s losses.
Up until this point, only Ethereum futures ETFs were approved for trading in the United States. ETFs are investment vehicles that are similar to mutual funds but trade on traditional stock exchanges. Futures are complex derivative investments that track the future price of an investment. A spot ETF tracks the current price of an asset rather than its projected future price.
Why Is Ethereum’s Price Declining?
After 11 spot bitcoin ETFs received approval in January, many believed that spot Ethereum ETFs would be approved soon after. However, over the past several months, there has been significant uncertainty surrounding the approval of the ETFs.
The SEC’s rule change opens the way for Ethereum ETFs to start trading, but some investors may be holding out for the final approval. Technically, this rule change allows for three exchanges to list eight spot Ethereum ETFs. Those include:
- NYSE Arca: Grayscale Ethereum Trust and Bitwise Ethereum ETF.
- Nasdaq: iShares Ethereum Trust.
- CBOE BZX: VanEck Ethereum Trust, ARK 21Shares Ethereum ETF, Invesco Galaxy Ethereum ETF, Fidelity Ethereum Fund and Franklin Ethereum ETF.
However, the funds themselves have not yet been approved and no date has been set for them to be listed. Therefore, there is still a chance that some of the funds may not actually start trading.
The approval process is expected to take several weeks, although there is a chance that the SEC will expedite the timeline.
Ethereum Is a Risk Asset
The United States is still in the midst of deciding how to regulate cryptocurrencies in general. However, this latest decision by the SEC apparently reveals a softening toward the asset class.
Like all cryptocurrencies, Ethereum is considered a high-risk investment. After reaching an all-time high of nearly $4,900 in November 2021, Ethereum is still down slightly from there. That’s even after the cryptocurrency’s recent gains.
High-risk investments like cryptocurrency can see tremendous price swings and extreme volatility, even compared with the tech-heavy Nasdaq, which is full of high-risk growth stocks.
As a relatively new asset class, nobody knows what the future holds for cryptocurrencies as investment vehicles. Predicting their price moves is very challenging.
In addition, cryptocurrencies are often subject to hacks and may be impacted by future regulations, which can affect their overall value.
If you choose to invest in Ethereum, you should consult a financial advisor first and never invest more than you can afford to lose.
