The U.S. Securities and Exchange Commission (SEC) has granted final approval for spot exchange-traded funds (ETFs) that hold Ethereum’s ether (ETH), marking a significant milestone for the crypto market. With this decision, American investors now have access to a second major cryptocurrency through easily tradable vehicles, following the earlier approval of Bitcoin (BTC) ETFs in January.

Packaging Ethereum in an ETF wrapper is expected to make it more appealing to conventional investors, who can now buy and sell these funds through traditional brokerage accounts. Since their debut earlier this year, Bitcoin ETFs have attracted substantial investment, and experts predict a similar trend for Ethereum ETFs. Matt Hougan, Chief Investment Officer at Bitwise, stated, “We’ve now fully entered the ETF era of crypto. Investors can now access more than 70% of the liquid crypto asset market through low-cost ETPs.” Hougan says he expects the first few weeks could be choppy, “as money may flow out of the $11 billion Grayscale Ethereum Trust (ETHE) after it converts to an ETP,” although he expects a new ETH all-time high by the end of the year.

With approval already priced in, early market reaction has been muted. Source: Brave New Coin Ethereum Liquid Index.

As noted, the conversion of Grayscale’s Ethereum Trust (ETHE) into a spot ETF will be a crucial development. ETHE, which offers institutional investors exposure to ETH, previously enforced a six-month lock-up period on its shares. With the transition to an ETF structure, traders can buy and sell more easily. The narrowing discount of ETHE to net asset value suggests that investors who bought Ethereum below par may redeem shares at NAV price upon conversion.

Analysts often compare Bitcoin to “digital gold” and describe Ethereum to the “open-source App Store.” While Bitcoin serves as a store of value, Ethereum’s underlying technology enables a wide range of decentralized applications (DApps). Investors seeking exposure to the thousands of applications utilizing blockchain technology are likely to find Ethereum ETFs appealing.

The approval of spot Bitcoin ETFs earlier this year significantly impacted BTC’s price, driving it to new all-time highs. Now, attention turns to Ethereum. Crypto analytics firm Kaiko suggests that ETH’s price will be “sensitive” to inflows from the newly approved ETFs. Investors are keenly watching the potential impact on the market, especially considering the underwhelming demand for futures-based ETH ETFs launched in late 2023.

Asset management giant BlackRock is actively preparing for the launch of its ETH ETF. The fee structure for BlackRock’s Ether ETF indicates its commitment to establishing a competitive presence in the emerging market. Other asset managers are following suit, each offering varied fee structures to attract investors.

As Ethereum ETFs begin trading, the crypto community eagerly awaits their impact on prices and broader altcoin markets. For example, a potential driver for Solana’s alpha momentum in the last week may be an indication that following Ether’s spot ETF launch, SOL may be next in line. Eric Balchunas, a popular Bloomberg ETF analyst who has often been the first to break pertinent news and information wrote on X last week, that after the ETH ETF launch “then Solana, and then.. it’s prob never going to end. The dam has broken.” His tweet didn’t just create momentum for ETH, but also for a few other large-cap alts like Avalanche (AVAX). 

Indeed, investor confidence in the broader altcoin market may also receive a boost. As Ethereum gains more mainstream exposure through ETFs, other altcoins could benefit from increased attention and investment. At the same time the interplay between Bitcoin and Ethereum prices will be closely watched, as both cryptocurrencies often influence each other.

The approval of Ethereum ETFs opens new avenues for investors, potentially reshaping the crypto landscape. Whether ETH’s price reaches $4,000 remains to be seen, but the crypto ETF era has undoubtedly arrived.

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