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Hashdex has withdrawn its application for a spot Ether ETF, according to a May 28 SEC filing. The application was pulled not long after the SEC approved eight other Ether ETFs from major financial firms like VanEck, BlackRock, and Franklin Templeton. The reason for Hashdex’s withdrawal is still unclear. Meanwhile, analysts predict that the price of ETH could rally to $4,500 before the ETFs hit the market and start trading. Additionally, BlackRock's spot Bitcoin ETF has overtaken Grayscale as the largest Bitcoin ETF.
Hashdex Pulls Spot Ether ETF Application
Investment manager Hashdex has withdrawn its application for a spot Ether exchange-traded fund (ETF), according to documents filed with the United States Securities and Exchange Commission (SEC). A filing from May 28 reveals that Hashdex pulled its application for a proposed rule change that would allow the debut of its Hashdex Nasdaq Ethereum ETF. The proposal was taken down on May 24, just a day after eight ETH ETFs were approved by the financial watchdog.
For now, there are still no details on the reasons for the move or whether Hashdex will resubmit its proposal. On May 23, the SEC approved the 19b-4 filings from VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise, clearing the way for spot Ether ETFs to be listed and traded on their respective exchanges. The ETFs are expected to launch in June.
Unlike other applicants, Hashdex’s application for a spot Ether ETF combined spot Ether holdings with Ether futures contracts on the same product to prevent potential manipulation. Other applicants, like Fidelity, ARK 21Shares, and Franklin Templeton, have focused more on purely spot-based Ether ETFs with some late amendments to their filings, like removing support for ETH staking in response to SEC feedback.
In addition, Hashdex’s ETF would have mirrored daily fluctuations in the Nasdaq Ether Reference Price to address regulatory concerns about market manipulation. According to its initial filing from September 2023: “Instead of holding 100% spot Ether, which could make it more susceptible to price manipulation in the spot market, the Fund will hold a mix of Spot Ether, Ether Futures Contracts, and cash.”
Hashdex was also among the issuers of spot Bitcoin ETFs that were approved in January. Similarly, the company’s BTC fund used an alternative strategy from other asset managers. Hashdex’s Bitcoin ETF did not depend on the Coinbase surveillance sharing agreement, opting instead to source spot BTC from physical exchanges in the CME market.
ETH to Hit $4,500 Before ETFs Launch?
Even before they were approved, ETH ETFs were the talk of the town, and some analysts are now extremely bullish about ETH’s potential before these ETFs hit the market. Arthur Cheong, founder and CEO of crypto-focused investment firm DeFiance Capital, predicts that the price of Ether could rally to the $4,500 mark before the first spot Ether ETFs start trading.
Cheong stated on X, “4.5k before spot ETF goes live for trading [in my opinion].” At the time of his post on May 26, ETH was trading at $3,903. If Cheong’s prediction actually comes true, Ether’s price would rally more than 15% from that price point. At press time, ETH was trading at an even lower level at $3,784.69 after its price fell by more than 2% in the past day of trading.
Despite the SEC’s approval of the 19b-4 filings being a very positive sign from the U.S. securities regulator, ETF issuers still need to get approval for their S-1 filings, which is a process that could take months.
Ether's Unique Selling Point
Recent doubts about defining Ether neatly to sell the idea of spot Ether ETFs have been addressed by Michael Nadeau, a crypto analyst at The DeFi Report. In a May 28 report, Nadeau stated, “ETH is a tech play on the growth of Web3. A ‘call option’ or ‘high-growth index for Web3 adoption.’ Whereas Bitcoin is ‘digital gold.’”
Nadeau argued that Ethereum potentially has “a much larger addressable market” when simplified with investment terminology. He also strongly believes that ETH could break its November 2021 all-time high of $4,870 once spot Ether ETFs launch, as they will increase demand pressure, very similar to what was seen with Bitcoin after the launch of spot Bitcoin ETFs in January.
Ethereum validators, unlike Bitcoin miners, do not have high operating expenses. This means they aren’t forced to sell to cover costs, which puts more pressure on the demand side. According to Nadeau “ETH does not have the same level of ‘structural sell pressure’ that BTC has since ETH validators do not incur operating expenses as Bitcoin miners do.”
He also pointed out that Ether is more “reflexive” to positive feedback loops compared to Bitcoin. This reflexivity could lead to price action driving on-chain activity, resulting in more ETH being burned, which further drives narratives, leading to more price action and on-chain activity. Nadeau even claimed Ethereum has “superior network effects” compared to Bitcoin and provides the opportunity for investors to stake Ether and earn a yield, which Bitcoin lacks.
Nadeau decided to voice his opinions after criticism from several crypto analysts who argued that Ethereum completely lacks a straightforward selling point, unlike Bitcoin’s very well known “digital gold” narrative. Glassnode lead analyst James Check stated, “Ethereum still has no elevator pitch, despite years of attempts.” Bloomberg ETF analyst Eric Balchunas also questioned if a simple one-liner exists for Ether.
BlackRock Overtakes Grayscale
There have been some major developments surrounding Bitcoin ETFs as well. BlackRock’s spot Bitcoin ETF surpassed the Grayscale Bitcoin Trust (GBTC) as the world’s largest ETF tracking the price of Bitcoin.
At the end of trading on May 28, BlackRock’s iShares Bitcoin Trust (IBIT) recorded $102.5 million in inflows, while GBTC registered $105 million in outflows. This inflow brought BlackRock’s spot Bitcoin ETF to a total of 288,670 Bitcoin held, compared to Grayscale, which now holds 287,450 Bitcoin. Initially, Grayscale held 620,000 Bitcoin at the time of its conversion in January.
A May 29 report from Bloomberg indicated that BlackRock’s fund held around $19.68 billion of Bitcoin as of Tuesday, while Grayscale held $19.65 billion. Fidelity’s ETF offering trailed at $11.1 billion. Both ETFs launched on the same day in January, and BlackRock’s ETF has since accounted for the lion’s share of inflows across all 11 spot Bitcoin ETFs.
Spot Bitcoin ETFs globally now hold over one million Bitcoin worth over $68 billion. This is almost 5.10% of the Bitcoin circulating supply.
BlackRock Funds Invest in Own Bitcoin ETF
Meanwhile, BlackRock’s income and bond-focused funds have purchased shares of the asset manager’s own spot Bitcoin ETF in the first quarter, according to regulatory filings. BlackRock’s Strategic Income Opportunities Fund (BSIIX) acquired $3.56 million worth of the iShares Bitcoin Trust (IBIT), while its Strategic Global Bond Fund (MAWIX) made a $485,000 purchase.
These figures might seem very high, but in reality, these IBIT shares represent only a small fraction of the BSIIX and MAWIX investment portfolios, which are worth $37.4 billion and $776.4 million, respectively.
More than 600 United States investment firms have bought spot Bitcoin ETFs since their launch in January. Some of the more well known firms who bought these ETFs include Morgan Stanley, JPMorgan, Wells Fargo, Royal Bank of Canada, BNP Paribas, UBS, and hedge funds including Millennium Management and Schonfeld Strategic Advisors have been active buyers of Bitcoin funds.
Millennium Management is the largest spot Bitcoin ETF accumulator, with $1.9 billion invested, including $844.2 million into IBIT and $806.7 million into the Fidelity Wise Origin Bitcoin Fund (FBTC).
