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Analysts Say Approval of Ethereum ETFs Could Trigger More Momentum for Cryptos

The U.S. Securities and Exchange Commission (SEC) recently announced that it had approved a regulation change allowing ether spot ETFs to be traded in the United States. Following the news, both Bitcoin and Ethereum prices saw a modest increase, with crypto-related stocks experiencing a notable rise.

The commission approved eight Ethereum ETF applicants’ Form 19b-4, including those from major companies including Fidelity, BlackRock, Grayscale, VanEck, ARK Invest, Franklin Templeton and Invesco Galaxy. However, before these ETFs can officially launch, their S-1 registration declarations need to receive approval. The SEC didn’t specify when these forms would be approved or when trading would commence.

This approval for ether ETFs follows the SEC’s earlier decision in January to approve Bitcoin spot ETFs for U.S. exchanges. Ethereum, the second-largest cryptocurrency, drives the Ethereum network, which uses proof-of-stake consensus and enables a variety of applications such as Web3 games, NFTs and tokenization.

The approval of the Ethereum ETF, according to Chainlink cofounder Sergey Nazarov in a note to IBD, is significant and represents a significant advancement for the cryptocurrency market. Smart contract automation is made possible by Chainlink’s network, which connects blockchain technology to real-world data sources. According to Nazarov, the fact that this permission has occurred shows that capital markets are now taking the cryptocurrency industry seriously and that blockchain technology and its uses are becoming more widely accepted.

One of the key aspects of this approval is the attention it brings to the potential of smart contracts and decentralized applications (dApps), which are essential for the Ethereum network. Nazarov noted the growing interest in these technologies and their adoption as part of a legitimate asset class.

Anchorage Digital CEO Nathan McCauley anticipates that the ether ETF launch will have an effect akin to that of the Bitcoin ETF debut. McCauley mentioned that a spot ETF provides a regulated and accessible way for investors to gain direct exposure to ether, unlocking significant potential for institutional investment.

According to U.K.-based Farside Investors, Bitcoin spot ETFs had seen inflows of approximately $13.44 billion by May 23, 2024. However, McCauley sees this approval as just the beginning. He also suggested that the next logical step is to incorporate staking into these ETFs, which would enhance returns for investors while supporting the security and scalability of the Ethereum network.

Last Friday, ether reached $3,750, slightly below Thursday’s $3,894 following the SEC announcement. Ethereum had risen earlier on rumors that spot ETFs would gain SEC approval. The crypto has increased by around 64% this year, even if it is now trading below both its all-time high of more than $4,800 in November 2021 and its 52-week high of $4,092 from March 12, 2024.

Friday saw a rise in Bitcoin to $68,900, very close to its Thursday top of $69,440. On Monday, it surpassed $70,000. It is still behind its all-time high of $73,798 set on March 14, 2024.

Among crypto-related stocks, Coinbase rebounded by 8.6% on Friday, recovering above its 50-day moving average after a 5.5% drop the previous day. BlackRock’s IBIT and other BTC ETFs also saw a 3.1% increase. Additionally, after temporarily clearing a $20.55 buy threshold earlier in the week before falling on Wednesday and Thursday, Robinhood (HOOD) increased 6.6% to close at $20.51.

The likely momentum resulting from the interest shown in ether ETFs could also benefit other industry actors, including Canaan Inc. (NASDAQ: CAN), as more investors look to increase their holdings in the space.

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