The race to launch a spot Ethereum ETF begins

Posted: September 8, 2023

• S-1 and 19b-4 filings have been made for the spot Ethereum ETF approval.
• ETH saw a mild reaction to the news of the filings.

The race to launch an Ethereum [ETH] ETF began on 6 September, with Ark Investment and 21 Shares filing applications. How does this type of ETF differ from futures-based ETH ETFs, and what potential impact could it have on the price and adoption of Ethereum (ETH)?

How much are 1,10,100 ETHs worth today?

Countdown begins for Ethereum spot ETF decision

In a recent filing with the U.S. Securities and Exchange Commission (SEC) on 6 September, asset management firms ARK Invest and 21Shares have submitted requests for regulatory approval to launch an exchange-traded fund (ETF), specifically designed to hold ETH.

This ETF marks the initial effort to introduce such a fund in the United States.

Also, as explained by James Seyffart on X (formerly Twitter), the initial filing made by Ark 21Shares was classified as an S-1 filing. This type of filing doesn’t trigger an immediate countdown for SEC approval.

Told you guys to expect some 19b-4’s!! haha. Look for even more tomorrow and Friday. https://t.co/zlxzjzP7yP

— James Seyffart (@JSeyff) September 6, 2023

However, a subsequent document, categorized as a 19b-4 filing, was submitted by the Chicago Board Options Exchange (CBOE) on 6 September. In this 19b-4 filing, the CBOE formally requested that the ARK 21Shares and the VanEck Ethereum ETF investment products be listed on CBOE’s BZX Exchange.

James Seyffart pointed out that the 19b-4 filings, in contrast to the earlier S-1 filings, signified that the SEC’s decision-making process is now in motion. Also, it started the countdown for a final decision.

How does this differ from a futures Ethereum ETF?

Futures-based Ethereum ETFs differ significantly from spot Ethereum ETFs. In futures-based ETFs, ETH itself is not held as an asset. Instead, these ETFs utilize derivative contracts, particularly futures contracts, as their underlying assets. As a result, the value of these ETFs is directly tied to the performance of ETH futures contracts and may not necessarily track the real-time spot price of ETH.

Moreover, the liquidity of futures ETFs is contingent upon the liquidity of the ETH futures contracts they are based on. If the futures contracts themselves lack liquidity, it can impact the liquidity and trading of the ETF.

Conversely, spot Ethereum ETFs hold actual ETH as their underlying asset. This means that they closely follow the spot price of ETH, which is the current market price of Ethereum. Also, the liquidity of spot Ethereum ETFs is determined by ETH’s availability and trading volume.

How these filings could impact Ethereum

Introducing an Ethereum ETF would simplify gaining exposure to ETH for a wider spectrum of investors. This enhanced accessibility has the potential to stimulate greater demand for Ethereum.

Moreover, ETFs are renowned for their high liquidity, and establishing an Ethereum ETF could enhance liquidity in the Ethereum market. This increased liquidity can draw in more traders and investors, potentially resulting in elevated trading volumes.

Realistic or not, here’s ETH’s market cap in BTC’s terms

How ETH reacted to the ETF news

The 4-hour timeframe chart of Ethereum displayed a modest price uptick on 6 September. By the close of trading, ETH was trading at approximately $1,632, showing a slight price increase on a daily timeframe.

However, as of this writing, it had retraced some of these gains and was trading at around $1,630. This suggested that the recent ETF-related news had a minimal impact on its ongoing price trend. However, this could change once news of ETF approval emerges.

Source: TradingView