Ethereum on the brink of 75% rally as SEC approves ETH ETFs

Ethereum ETFs approved as SEC gives shocking green light to applications
Bipartisan US lawmakers earlier urged SEC Chair in a letter on Thursday to give the green light.
Ethereum may rally more than Bitcoin did following ETF approval.

Ethereum (ETH) bounced back after a brief dip on Thursday as the Securities & Exchange Commission (SEC) approved spot ETH ETFs in a shocking U-turn. US lawmakers had earlier penned a letter to Chair Gary Gensler, urging him to approve the ETFs. Hong Kong regulators are also discussing whether issuers can offer ETH staking to investors.

Also read: Ethereum bulls await ETF approval as BlackRock, Bitwise, Grayscale submit amended ETH ETF filings

Daily digest market movers: SEC approves spot ETH ETFs

Ethereum is the most trending digital asset after receiving surprising spot ETH ETF approval on Thursday.

When asked by some reporters to preview the SEC's decision on Ethereum ETFs on Thursday, Gensler declined, stating, "I don't have anything on this particular filing." However, the agency approved 19b-4s filings of eight spot ETH ETF applicants later in the day including BlackRock, Bitwise, Grayscale, Van Eck, Ark 21Shares, Fidelity, Franklin Templeton and Invesco Galaxy.

The SEC asked exchanges to submit updated 19b-4 forms of issuers on Monday. As of Wednesday, all applicants except Hashdex submitted the amended filings.

Fidelity and Grayscale also updated their S-1 applications to remove any language related to staking since experts are of the opinion that the SEC may reject applications that include the feature.

The 19b-4 filings are what national exchanges like the NASDAQ or the New York Stock Exchange (NYSE) submit to the SEC to seek approval for listing new products on their trading platforms. In the context of ETFs, S-1s refer to the initial registration forms detailing how a fund would be managed and track the underlying asset's price.

The SEC must also approve S-1s before the ETFs can launch officially.

Industry experts also believe that spot ETH ETF S-1 applications may take weeks or months to receive approval from the SEC.

TO BE CLEAR: This does not mean they will begin trading tomorrow. This is just 19b-4 approval. Also needs to be an approval on the S-1 documents which is going to take time. We’re expecting it to take a couple weeks but could take longer. Should know more within a week or so!
— James Seyffart (@JSeyff) May 23, 2024

A bipartisan group of Congress members earlier penned a letter to SEC Chair Gary Gensler, suggesting the regulator approve spot ETH ETF applications and, eventually, other digital assets. According to the lawmakers, the "transparency and reporting requirements" of exchange-traded products (ETPs) offer crypto access to investors in a regulated way. They also suggested that the SEC apply the same principles it used in approving spot Bitcoin ETFs to evaluate applications for spot ETH ETFs "as the legal considerations pertinent to Bitcoin also apply to Ether."

Meanwhile, despite Ethereum's popularity and price growth in the past few days, Hong Kong's spot Ethereum ETFs haven't risen in subscriptions or trading volume. On May 22, the single-day net subscription was 62.8 ETH, and the total single-day transaction volume was only $390,300, according to data from SoSoValue.

According to Tree News, the Hong Kong Securities & Futures Commission (SFC) is in talks to allow issuers to provide staking features for investors. The low interest may have prompted issuers to use staking as an incentive to attract investors.

ETH technical analysis: Ethereum may rally more than 75% if ETF is approved

Ethereum is trading around $3,818 after a sharp drop from the $3,952 price level. The brief decline cut short a move to tackle the $4,093 resistance formed on March 11. However, the $3,730 support proved strong enough to weather the drop.

ETH/USDT 4-hour chart

The sudden dip was likely caused by selling pressure from MEV trading firm Symbolic Capital Partners, which sold 6,968 ETH worth $27.38 million. Following the swift dip, ETH long and short liquidations are almost equal at $31.22 million and $31.21 million, respectively.

Also read: US House of Reps passes bill aiming to regulate cryptocurrencies

With the SEC spot ETH ETF approval confirmed, Ethereum could break the resistance and beat its all-time high of $4,878. Bernstein analysts have predicted that an approval may cause ETH to rally 75% to $6,600 like Bitcoin did when the SEC approved its spot ETF.

Many others predicted that ETH may soar higher than that given its smaller market capitalization compared to Bitcoin and the market not pricing in an approval before.

Ethereum development FAQs

What is the next big Ethereum software update?

After the Merge, the Ethereum community is looking at the Sharding upgrade next, which has been slated for sometime later in the year. The development can be summarized in four words, “scalability through more efficient data storage.” The software update will increase the capacity of the blockchain, widening the amount of data that can be stored or accessed. At the same time, all services running atop the Ethereum blockchain will enjoy significantly reduced transaction fees.

What is the difference between hard fork and soft fork?

A fork is the splitting of a blockchain after developers agree and proceed to implement upgrades. The decision comes after these developers reach a consensus for a software upgrade. The ensuing part will see one part continue with the status as is, while the other one will proceed with new features combined with the former ones. A hard fork basically entails permanent divergence of a new side chain from the original one, while a soft fork is doing the same, only difference being that it is temporary.

What is EIP-4844?

EIP-4844 is an improvement proposal for the Ethereum network. The upgrade promises reduced gas fees, which is a valuable offering considering the high transaction cost that continues to daunt crypto players. It has been a long-standing concern for the Ethereum network. The proposal is also referred to as “proto-Danksharding,” with an unmatched ability to increase the speed of transactions on the Ethereum blockchain. At the same time, it helps to reduce the transaction cost as everything becomes decentralized.

What is gas in the context of Ethereum?

Gas token is a new, innovative Ethereum contract where users can tokenize gas on the Ethereum network. This means they can store gas when it is cheap and start to deploy the gas once the market has shifted to the north. The use of Gas token helps to subsidize high gas prices on transactions, meaning investors can do everything from arbitraging decentralized exchanges to buying into initial coin offerings (ICOs) early.

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