ETH ETF Filings Could Fuel a Surge in the Ethereum Ecosystem

Multiple investment funds have submitted applications for their own ETH ETFs this week.

The Ethereum ecosystem weakened somewhat over the past 24 hours as the broader cryptocurrency market got hit with another wave of sell volume. Despite the losses over the past 24 hours, things may not stay gloomy for the Ethereum ecosystem for too long. This week, multiple large investment funds have filed applications for their own Ethereum Exchange Traded Funds (ETFs).

The outcomes of these applications are expected to be revealed in mid-October this year. If successful, the Ethereum ecosystem may receive a significant boost. An Ethereum (ETH) ETF has the potential to significantly amplify the Ethereum ecosystem's prominence and attractiveness. By trading on traditional stock exchanges, an Ethereum ETF would increase the cryptocurrency's liquidity and make it more accessible to a broad spectrum of investors, including those unfamiliar with the intricacies of digital asset exchanges.

This ease of access eliminates the complexities of managing digital wallets and the associated security risks, making investment in Ethereum more palatable for many. Furthermore, ETFs, being familiar instruments in the financial world, could draw substantial institutional investment, infusing the ecosystem with a robust influx of capital.

Institutions Try to Make It Easier to Invest in ETH

Eric Balchunas, Bloomberg's senior analyst for ETFs, and his colleague James Seyffart have recently summarized all of the ETH futures ETF approval requests currently being reviewed by the U.S. Securities and Exchanges Commission (SEC). An impressive total of six submissions have been made, hinting at a surge in interest and the potential for a significant shift in the investment landscape.

Bitwise, Roundhill, VanEck, ProShares, and Grayscale submitted their Ethereum Futures ETF filings with the SEC on 1 August 2023. Meanwhile, Volatility Shares filed their application on 28 July 2023. Notably, ProShares was the only entity to file for two products: the ProShares Short Ether Strategy ETF and the ProShares Ether Strategy ETF. All of these applications are currently labeled as "Awaiting Approval" and the SEC is expected to announce its verdict by mid-October this year.

In the context of the cryptocurrency landscape, the importance of these filings cannot be overstated. Futures and spot ETFs for cryptocurrencies are considered revolutionary game-changers in the investment world. They present an opportunity to eliminate the need for companies to physically store Bitcoin (BTC) and ETH in digital custody. This translates to a major shift in how wealth managers approach cryptocurrency investments.

Traditionally, investments in cryptocurrencies required a certain level of technical know-how and an acceptance of the inherent risks involved in digital asset storage. The need for secure digital wallets and the specter of potential hacks have often served as significant deterrents for traditional investors. The introduction of cryptocurrency ETFs, however, changes this dynamic entirely.

By purchasing shares in a cryptocurrency ETF, investors can gain exposure to the performance of Bitcoin or Ethereum without the need to directly buy, hold, and secure these digital assets. ETFs replicate the performance of an underlying asset – in this case, Bitcoin or Ethereum – allowing investors to participate in the cryptocurrency market in a way that is more familiar and comfortable to them.

This development could potentially lead to a significant influx of capital into the cryptocurrency market. As more traditional investment entities, like wealth managers, gain the ability to easily invest in cryptocurrencies, we could witness a broadening of the investor base. This would not only increase liquidity in the market but also potentially trigger a new cryptocurrency bull run.

Furthermore, it is not just the existing applicants that are stirring excitement. The investment community is keenly awaiting the potential entry of BlackRock, the $9 trillion asset management giant, into the Ethereum Futures ETF space as well. As pioneers in the ETF market, BlackRock's entry would signify a strong endorsement for cryptocurrency ETFs, further enhancing their credibility and attractiveness to traditional investors.

While all this promise and potential is enticing, it is important to remember that the approval of these applications is not guaranteed. The SEC has historically been cautious when it comes to cryptocurrency-based financial products. This cautious approach is based on concerns over market volatility, investor protection, and potential market manipulation. Therefore, the upcoming decisions in mid-October will be a critical milestone not only for the applicants but for the entire cryptocurrency industry.

ETH NFT Sector Performance

Meanwhile, the recent bearish trend in the cryptocurrency market has not been kind to all segments, with non-fungible tokens (NFTs) and play-to-earn applications (P2E) being hit the hardest. Detailed data analysis has revealed the scale of the collapse that these sectors have endured, highlighting the inherent volatility and risk involved in these markets.

July 2023 marked a particularly gloomy period for Ethereum-based NFTs, seeing their worst month since November of last year. The aggregated trading volume across major NFT marketplaces plummeted to $568.5 million for the month, representing an almost 90% decrease in trading volume when compared to the record-breaking figures of January 2022.

These sobering statistics were published by Sealaunch, a team of NFT data researchers. It is important to note that the drop was not confined to trading volume alone. The number of unique NFT users also experienced a steep fall, dropping to 107,000 holders – a multiyear low. The past 12 months saw a decrease of over 66% in unique NFT holders, underlining the severity of the bearish trend.

OpenSea, the world's largest NFT marketplace, was not immune to this downturn. The count of independent addresses for OpenSea monthly transactions fell to 64,600, a number not seen since two years prior. This decrease in activity is reflective of the broader downturn in the NFT market and highlights the sensitivity of these emerging markets to broader economic trends.

Furthermore, the aggregated number of NFT sales also took a severe hit, shedding 82% from the peak registered in February 2022. This precipitous drop underscores the dramatic shift in the market dynamics of NFTs over the past year.

It is clear that the NFT and P2E sectors, while offering exciting opportunities for innovation and financial growth, are not exempt from the cyclical nature of markets. These sectors are still in their infancy and, as such, their susceptibility to fluctuations in the broader economy is perhaps more pronounced.

This recent downturn could be seen as a market correction following the impressive and seemingly unsustainable growth these sectors experienced in the past year. However, it could also be viewed as a signal of the inherent risk associated with investing in such nascent markets.

Despite the recent bearish trend, it is important to remember that the potential of NFTs and P2E extends beyond simple monetary value. NFTs, for instance, have the ability to revolutionize the way we think about ownership and authenticity in the digital world, while P2E applications are at the forefront of merging entertainment with income generation.

ETH Ecosystem Performance

The positive development regarding the filing of numerous ETH ETFs has not yet carried over to prices within the Ethereum ecosystem. CoinMarketCap indicated that the collective market capitalization for Ethereum projects declined by 1.26% over the past 24 hours. As a result, the total market cap stood at approximately $238,658,283,811 at press time.

The leading cryptocurrency in the ecosystem, ETH, was changing hands at $1,834.18 following a 24-hour drop of 0.92%. This negative daily performance pushed the altcoin market leader’s weekly performance further into the red zone to -2.27%.

Similarly, the next two largest altcoins in the Ethereum ecosystem, Shiba Inu (SHIB) and Mantle (MNT) experienced price drops of 0.55% and 0.49% respectively. Consequently, SHIB’s price stood at $0.000008222 while MNT was trading at $0.5186. Notably, SHIB’s 24-hour loss was not enough to drag the meme coin’s weekly performance into the red zone, as SHIB was up 4.60% for the past week.