Seven industry veterans: How much impact will the approval of the Ethereum spot ETF have on the crypto market?

Source: DLNews

Compiled by: Odaily Planet Daily Wenser

Editor’s Note: Recently, there has been a significant turnaround in the sentiment surrounding Ethereum spot ETFs, attracting considerable attention from both the market and regulators. Fueled by optimism over the approval of Ethereum spot ETFs by the U.S., Ethereum's price surged this week, currently standing at $3,807. Although the reasons behind this sudden shift are still debated, market observers and seasoned cryptocurrency professionals generally believe that regulatory recognition will have varying degrees of impact on Ethereum and other cryptocurrencies. Notably, asset management firm VanEck was the first brokerage to submit an application for an Ethereum spot ETF to the U.S. Securities and Exchange Commission (SEC), with the outcome of the 19b-4 filing expected around 4 AM Beijing time on May 24. Let’s take a look at the views of seven industry veterans on this matter and its subsequent effects.

Digital Asset Management Firm: Galaxy Digital

Galaxy Digital CEO Mike Novogratz stated in an interview with CNBC that the "widespread" shift that occurred in Washington over the past 24 hours has disrupted the game surrounding Ethereum spot ETFs. He believes that if the SEC's change is politically motivated, "this will be a huge shift." "If that’s the case, (the cryptocurrency market) prices will be much higher than they are now."

Additionally, he mentioned that as Trump leads Biden in polls, the cryptocurrency super PAC has raised over $150 million to support candidates in the industry (such as in some swing states), making Democrats' aversion to cryptocurrency increasingly untenable. "In fact, it’s Senator Elizabeth Warren from Massachusetts and a small group of people who have tied the Democrats to this issue."

Novogratz added, "There’s no reason to turn cryptocurrency technology into a purely political issue."

Ethereum Core Institution: Consensys

Ethereum co-founder and founder of crypto infrastructure company Consensys Joseph Lubin stated that he expects "massive demand" for Ethereum, which could lead to supply constraints and drive up its price.

Lubin told the media that institutions already engaged with Bitcoin ETFs "are likely looking to diversify into the second approved ETF." He stated, "Buying Ethereum through an ETF will create significant natural, pent-up pressure." He added that the supply available to meet this demand will be less compared to when the spot Bitcoin ETF was approved in January.

For Bitcoin, authorized participants (companies that contract to buy Bitcoin on behalf of the ETF when new shares are created daily) can simply purchase idle Bitcoin on exchanges or through over-the-counter counterparts. However, on-chain data shows that over 27% of Ethereum has already been staked, meaning it is locked in contracts earning yields for its owners.

"Most of the Ethereum is functioning within core protocols, DeFi systems, or DAOs (Decentralized Autonomous Organizations)," Lubin pointed out. In other words, not only is Ethereum's market cap lower than Bitcoin's—making its price more sensitive to capital inflows—but a significant portion of its supply is unavailable for trading in spot ETFs.

Asset Management Giant: Bitwise

Asset management giant Bitwise Chief Investment Officer Matt Hougan wrote in a blog post this week, "Cryptocurrency is becoming mainstream, and this development will push cryptocurrency to historical highs."

However, Hougan stated that the catalyst is not the sudden optimism for Ethereum spot ETFs. "Something significant happened in Washington: a bipartisan group of senators and representatives passed the first-ever pro-cryptocurrency legislation in Washington's history." He referred to the bill to repeal the SEC's SAB 121 policy, which imposed strict rules on cryptocurrency custody.

"Whether or not we get approval for the Ethereum spot ETF, the latest support from Washington for cryptocurrency is evident," Hougan added.

Blockchain Infrastructure Platform: Swarm

Blockchain infrastructure platform Swarm co-founder Timo Lehes believes that once the Ethereum spot ETF is approved, "capital will flow massively" into Ethereum.

"Once you have allocated Bitcoin, you will also look for other assets as part of portfolio diversification," he told the media. "Investors will naturally choose ETH as a significant allocation for the next crypto asset. Although the inflows may pale in comparison to the Bitcoin spot ETF launched in January, it will still be enough to change its price trajectory."

Data Analysis Platform: Kaiko

Analyst Adam McCarthy from data analysis platform Kaiko stated that those flocking around bullish options are now seeking higher returns, but investors should remain cautious. He noted, "The demand for the Hong Kong Ethereum spot ETF is not large and has already experienced several days of net outflows. The lack of staking channels for the Ethereum spot ETF is also a significant factor and may further impact demand."

He suggested keeping an eye on Grayscale's $9 billion ETHE product, "If it starts to see significant outflows, it will have a substantial impact on Ethereum's price."

Research Analysis Firm: Bernstein

According to analysts Gautam Chhugani and Mahika Sapra from research analysis firm Bernstein (which has total assets of $725 billion), the approval of a spot Ethereum ETF is expected to drive Ethereum's price up by approximately 75%, reaching as high as $6,600.

They noted that the SEC approved a similar Bitcoin spot ETF product in January, and three months later, this event stimulated Bitcoin's price to rise by about 75%, reaching a historic high of $73,000.

Chhugani and Sapra stated in a report this week, "We expect ETH's price movement to be similar."

It is worth mentioning that in November 2021, Ethereum reached an all-time high of $4,878, and if it indeed reaches $6,600, Ethereum's price will break its historical record once again.