Ethereum price lags, investors potentially reallocating capital after BlackRock's updated S-1 filing


  • Ethereum ETFs will likely begin trading soon after BlackRock filed its updated S-1 application.
  • Vanguard won't offer Ethereum ETFs on its platform.
  • Ethereum investors may be reallocating capital to benefit from the potential larger upside of smaller-cap DeFi tokens.

Ethereum (ETH) price shows neutrality despite positive updates of BlackRock's spot ETH ETF updated S-1 application and the Securities & Exchange Commission’s (SEC) engagement with issuers. A key reason for the price lag may be a potential capital reallocation from investors to DeFi tokens in hopes of a larger upside if the launch of spot ETH ETFs spurs a rally.

Daily digest market movers: BlackRock S-1 filing, Vanguard says no to Ethereum

BlackRock filed an updated S-1 for its spot Ethereum ETF on Wednesday, according to updates on the SEC's website. The recent filing comes after the SEC approved 19b-4 applications of eight issuers — including BlackRock's iShares Ethereum Trust — on May 23. 

National exchanges like the NASDAQ or the New York Stock Exchange (NYSE) submit 19b-4 filings to the SEC to seek approval for listing new products on their trading platforms. On the other hand, S-1 refers to the initial registration form detailing how a fund would be managed and how it would track the underlying asset's price.

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

Read more: Ethereum slightly tilts toward bears, may only see 20% of Bitcoin ETF flows following silver comparison

The filing revealed the iShares Ethereum Trust's ticker as ETHA and mentioned key details about its seed capital investor.

"On May 21, 2024, the Seed Capital Investor, an affiliate of the Sponsor, subject to conditions, purchased the Seed Creation Baskets, comprising 400,000 Shares at a per-Share price equal to $25.00," said BlackRock in its filing.

Additionally, BlackRock updated the APs for the ETF, replacing JP Morgan with BMO Capital Markets Corp.

An AP is a financial institution — often a bank — that provides liquidity to facilitate the creation and redemption of ETF shares.

According to Bloomberg analyst James Seyffart, BlackRock's latest filing confirms that the SEC and issuers are working toward spot ETH ETF launches.

Although several analysts have expressed that an S-1 approval usually takes months after 19b-4 approvals, Bloomberg analyst Eric Balchunas suggested that spot ETH ETFs may only take weeks.

"Good sign. Prob see rest roll in soon. Then prob one more round of fine-tune comments from Staff. End of June launch a legit possibility altho keeping my o/u date as July 4," said Balchunas.

Also read: Ethereum may continue outperforming Bitcoin as 'programmable money' may be ETH's new slogan

He also noted that BlackRock may update its S-1 again as it lacks information on fees and other key data. So far, Van Eck and BlackRock are the only issuers to have submitted updated S-1 filings to the SEC.

The Block also reported that two sources confirmed that the SEC asked issuers to turn in their updated S-1 filings by Friday after which the SEC will give its first round of comments before further amendments. 

Meanwhile, Vanguard has said it won't offer spot ETH ETFs on its brokerage platform, according to Blockworks. "While we continuously evaluate our brokerage [offering] and evaluate new product entries to the market, spot ether ETFs will not be available for purchase on the Vanguard platform," a Vanguard spokesperson told Blockworks. The company also declined to offer Bitcoin ETFs on its platform when it launched.

However, many expect the asset manager to eventually soften its stance toward crypto assets, especially after appointing former BlackRock executive Salim Ramji as its new CEO. Salim Ramji was instrumental in BlackRock's foray into digital assets like Bitcoin and Ethereum.

Fidelity also listed its spot ETH ETF on DTCC under the ticker FETH, according to PhoenixTrades.

ETH technical analysis: Ethereum investors potentially reallocating capital

Ethereum traded around $3,776 on Thursday after bouncing from the $3,710 support. ETH's current price action suggests a mix of profit-taking and buying from investors. This is also confirmed by a series of large exchange ETH inflows and outflows, according to Whale Alert. Ethereum liquidation data also aligns with $11.94 million of liquidated long positions and $10.92 million of shorts.

Read more: Week Ahead: Checking the health of Bitcoin’s bull run

Considering the positive news surrounding ETH ETFs and the potential rally that may occur from their launch, it may seem strange on the surface that some investors are taking profits. However, these investors may be reallocating capital in small portions to DeFi tokens, considering their potential bigger upside during a rally.

ETH/USDT 4-hour chart

ETH/USDT 4-hour chart

ETH will likely see more price gains as other issuers update their S-1 applications. Hence, it may tackle the $4,093 resistance, which has proven hard to break in the past few days. The $3,605 support may hold strong in case of a decline.

Ethereum FAQs

Ethereum is a decentralized open-source blockchain with smart contracts functionality. Serving as the basal network for the Ether (ETH) cryptocurrency, it is the second largest crypto and largest altcoin by market capitalization. The Ethereum network is tailored for scalability, programmability, security, and decentralization, attributes that make it popular among developers.

Ethereum uses decentralized blockchain technology, where developers can build and deploy applications that are independent of the central authority. To make this easier, the network has a programming language in place, which helps users create self-executing smart contracts. A smart contract is basically a code that can be verified and allows inter-user transactions.

Staking is a process where investors grow their portfolios by locking their assets for a specified duration instead of selling them. It is used by most blockchains, especially the ones that employ Proof-of-Stake (PoS) mechanism, with users earning rewards as an incentive for committing their tokens. For most long-term cryptocurrency holders, staking is a strategy to make passive income from your assets, putting them to work in exchange for reward generation.

Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) mechanism in an event christened “The Merge.” The transformation came as the network wanted to achieve more security, cut down on energy consumption by 99.95%, and execute new scaling solutions with a possible threshold of 100,000 transactions per second. With PoS, there are less entry barriers for miners considering the reduced energy demands.

 


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