Ethereum Spot ETF Frenzy Propels ETH Price to $3,000

The second-largest cryptocurrency has briefly reached a $3,000 mark unseen since April 2022 amid speculations that the Ethereum spot ETF could win the SEC’s approval as early as May.

Ether’s price has peaked at $3,003.40 just after 9 a.m. ET on Tuesday before pulling back. At the time of writing, ETH is trading at $2,919, according to the data from TradingView. The prospect of a potential approval for the spot Ether exchange-traded funds is fueling the market with optimism: the last time Ether touched a $3,000 level was nearly 22 months ago, before the collapse of Terra/Luna brought chaos to the industry.

As Ether’s pierce flirted with the $3,000 level, Bitcoin followed suit, reaching a new yearly high of $52,884 amid a broader pre-halving crypto market rally. Over the past week, the flagship cryptocurrency gained 8%, reclaiming its more than $1 trillion market cap for the first time in two years.

Wen Ethereum spot ETF?

Over the last few months, a number of high-profile Wall Street asset managers have already filed for the spot Ether ETF, including BlackRock, Fidelity, Grayscale, Ark & 21Shares, Invesco & Galaxy Digital, VanEck, and Hashdex. The speculative frenzy around the potential approval for such products, along with the upcoming Dencun upgrade, have been the main catalysts for Ether’s recent gains. As a result, Ethereum outperformed Bitcoin with nearly twice the weekly gains, yielding 16% for traders.

On February 7, crypto news outlet CoinDesk reported that the Securities and Exchange Commission delayed its decision on the Ethereum spot ETF jointly proposed by Invesco and Galaxy Digital. Previously, in January, the regulator also delayed BlackRock’s application for the same Ether product and postponed the decision on the filing by Grayscale Investments to convert its Ethereum Trust (OTCMKTS: ETHE) into an ETF.

According to Bloomberg Intelligence analyst James Seyffart, the delays are to be expected, as the regulator is likely following the same playbook as in the case of Bitcoin ETFs. Seyffart believes that the only date that matters so far is May 23, which is the final deadline for VanEck’s Ethereum spot ETF application.

When asked about what would happen if the SEC denied VanEck’s filing on that date, the analyst said that he personally couldn't imagine the Commission rejecting VanEck and then approving anyone else product from the same wave of ETF applications.

Last month, Geoffrey Kendrick, head of Standard Chartered Bank's forex and digital assets research, projected that the Ethereum spot ETF is likely to win regulatory approval, stating that there’s no fundamental reason for the Commission to treat Ethereum differently than Bitcoin. The analysts pointed out to the fact that ETH is listed as a regulated futures contract on the Chicago Mercantile Exchange, and the SEC never alleged that it falls under the definition of an unregistered security in its numerous legal actions against the crypto companies.

Until the expected approval date on May 23, Ether is likely to outperform Bitcoin and shoot up nearly 70%, hitting the $4,000 mark, Kendrick estimates. The analyst also expects the first batch of Ethereum ETFs to be simple products that just track the price of ETH, while the more complex ETFs that include staking rewards are likely to be introduced later.

"We expect pending applications for ETH U.S. spot ETFs to be approved on May 23, the final deadline for the first of the ETFs under consideration — the equivalent date to Jan. 10 for BTC ETFs," wrote Kendrick and the team. "If ETH prices perform similarly to how BTC prices performed in the lead-up to BTC ETF approval, ETH could trade as high as $4,000 by then."

Should the Ethereum ETF win regulatory approval, it will face significantly less selling pressure than Bitcoin, since Grayscale Ethereum Trust (ETHE) has a much smaller market share than Grayscale Bitcoin (GBTC), which saw massive outflows after conversion to an ETF as investors rushed to cash out.

On the other hand, investment bank TD Cowen is pessimistic that the Ethereum spot ETF may be just around the corner, claiming that the regulator is unlikely to greenlight such a product before the 2024 US presidential elections scheduled for November. In a similar vein, JPMorgan analysts don’t see more than a 50% chance for approval in May, as the SEC would first need to classify Ethereum as not security before it could proceed with the applications.