The US Securities and Exchange Commission is likely to allow exchange-traded funds to hold the cryptocurrency Ethereum in May, according to Standard Chartered.
May 23 is the last date by which the SEC must consider ETF applications from VanEck and Ark 21Shares, the bank wrote in a research report this week. The asset managers will be the first to come up against the final deadline.
Standard Chartered expects the US regulator to rule on the applications on the final date, as it did on January 10 when it approved 10 bitcoin ETFs. Ethereum also has key similarities to bitcoin’s legal and financial status that suggests it will follow a similar approval pattern, according to Geoff Kendrick, the head of FX research, west, and digital assets research at Standard Chartered.
Last June, the SEC left bitcoin and ether off a list of 67 tokens it considered to be securities. In addition, ether – like bitcoin – also has futures traded on the Chicago Mercantile Exchange – a key surveillance tool. At about $US285 billion ($434.2 billion), ether is the second-largest cryptocurrency in market value after bitcoin.
Mr Kendrick expects ether’s price to rise to $US4,000 by the projected May 23 approval date, assuming that it follows a trading pattern similar to bitcoin through the ETF approval process. Ether traded at about $US2,338.54 on Wednesday.
That price prediction, however, is based on multiple assumptions being true, including general market sentiment for approval remaining low, implied-volatility being wrong, and the SEC approving multiple applications on the same day.
Ether is expected to avoid much of the sell-offs that bitcoin experienced post its own ETF approval, Standard Chartered said. The largest digital currency fell as much as 20 per cent following the ETF approval as investors, including FTX, sold billions in holdings of the Grayscale Bitcoin Trust (GBTC).
The fund was converted from a trust that holders couldn’t make redemptions. Grayscale’s existing ethereum trust, however, holds a smaller portion of the total market capitalisation of ether, compared with the bitcoin held in GBTC.
“These factors should make ETH less vulnerable than BTC to a post-approval selloff,” Mr Kendrick wrote.
Bitcoin, meanwhile, is on course to advance for a fifth straight month in what would be the token’s longest such winning streak since a pandemic-era rally oiled by easy money.
The largest digital asset has risen about 2 per cent in January, a month of pronounced swings sparked by the rollout of the ETFs and shifting views on the outlook for US monetary policy.
A run of five straight monthly gains would be the longest since a six-month stretch spanning October 2020 to March 2021, according to data compiled by Bloomberg. The token hit a record high of almost $US69,000 in November 2021. It is currently trading at around $US43,024.
The token surged almost 160 per cent last year ahead of the launches in a wager that the ETFs will attract new investors.
Bloomberg
