Summary: Despite the Ups and Downs, Its Arrival Will Be Inevitable.
The highly anticipated Ethereum spot ETFs are expected to be officially approved and listed for trading this week.
Although the SEC returned the S-1 form to the ETH spot ETF issuer again last week, potentially causing another delay in the listing, it is expected to be approved no later than this summer.
Looking back at the week of May 20, as the news spread, the price of ETH surged 20% in one day, with a peak weekly increase of 30%. What impact will the official launch of the ETH spot ETFs have on the market this time, and what trading strategies can investors adopt in response?
For the ETH spot ETFs to be officially launched, two key documents must be approved: the 19B-4 form and the S-1 form, both of which are indispensable. Simply put, the 19B-4 form is submitted by the exchange and serves as the admission document that allows the ETFs to be listed on the exchange, while the S-1 form is submitted by the issuer and includes detailed information about the ETFs.
On May 24 of this year, the SEC officially approved the 19B-4 forms for eight Ethereum spot ETFs, including those from BlackRock, Fidelity, and Grayscale. The focus then shifted to the S-1 forms, which must be made effective by the ETF issuers before trading can commence. After submitting the first draft of the S-1 documents on May 31, the SEC provided comments in mid-June. On June 21, the institutions submitted revised versions of the S-1 forms, thus completing the first round of review.
Bloomberg ETF analyst Eric Balchunas stated in an article that, based on the revisions made by each issuer, the Ethereum spot ETFs are expected to be launched on July 2. This prediction has been widely accepted in the market, as Eric's previous analyses on crypto spot ETFs have all been confirmed, making his analyses a trusted trading indicator.
However, an unexpected development occurred. On June 29, the SEC returned the S-1 forms again with a few comments, requesting the issuers to address these comments and resubmit by July 8. This means that at least one more round of filing is required before the ETF trading can begin. Therefore, it is highly unlikely that the ETFs will launch in early July.
In fact, SEC Chairman Gary Gensler previously stated publicly that the S-1 is expected to be approved sometime this summer. "The timing for when exchange-traded funds (ETFs) tied to the cryptocurrency ether can begin trading depends largely on how quickly issuers respond to the U.S. Securities and Exchange Commission's queries. The SEC will complete the review of the S-1 documents as quickly as possible while ensuring market transparency and protecting investors' interests."
Gary Gensler's remarks are not baseless. Typically, the total review time for the S-1 takes 60 to 120 days, so the market will definitely see the ETH spot ETFs by September at the latest. If the issuers respond more proactively to the SEC's requirements, the ETH spot ETFs might even be approved "suddenly."
Investors are most concerned about how the market price will change if the ETH spot ETFs are approved.
Looking at the Bitcoin spot ETFs, after its approval on January 10 of this year, the price of BTC fell from $49,000 to $38,500 at one point, a decline of over 20%. The reason for this drop was Grayscale's market impact—the management fee for the Grayscale Bitcoin spot ETFs (GBTC) is 1.5%, while several other providers have fees around 0.2%. Some Grayscale users, needing to rebalance their portfolios, caused the price to drop.
The same situation might occur with the ETH spot ETFs. Currently, the management fee for the Grayscale Ethereum Trust (ETHE) is 1.5%, with a total holding of 2.931 million ETH (approximately $9.95 billion). Several other applicants have lower management fees than Grayscale. For instance, Franklin Templeton's management fee is 0.19%, and VanEck is even waiving the management fee—eliminating fees on the first $1.5 billion in assets until 2025, after which a 0.2% fee will apply. In this scenario, a "Grayscale sell-off" is likely to happen again, potentially leading to a drop in ETH prices by over 20%. Therefore, it is not recommended for investors to buy in immediately after the listing.
In fact, after the initial price drop, BTC surged by over 90% in the following months. BlackRock was a major driver of this increase, with its IBIT performing the strongest and having the best liquidity, with a total net asset value of $18.52 billion, surpassing Grayscale.
BlackRock also has a strong affinity for Ethereum. CEO Larry Fink stated in an interview that he sees the value in launching Ethereum spot ETFs and believes it is part of the technological revolution in financial markets. He sees tokenization as the future trend, and BlackRock's BUIDL fund, a digital liquidity fund, is listed on Ethereum.
It is easy to imagine that with the official approval of the ETH spot ETFs, BlackRock will likely enter a buying spree, potentially driving ETH prices up by over 50% or even doubling them. After all, there is a saying on Wall Street: "BlackRock Wants, BlackRock Gets." As a financial giant managing $10 trillion in assets, even the SEC seems to make way for BlackRock.
Industry insiders are also optimistic about the development of the ETH spot ETFs. J.P. Morgan strategist Nikolaos Panigirtzoglou estimates that the Ethereum spot ETFs will attract $1 billion to $3 billion in net inflows this year. K33 Research senior analyst Vetle Lunde predicts that the first five months alone could see $4 billion in net inflows, reducing the circulating supply of ETH and pushing its price higher. Bitfinex derivatives head Jag Kooner suggests that the Ethereum spot ETFs could attract 10-20% of the funds currently flowing into Bitcoin ETFs.
Since a "Grayscale sell-off" is likely to occur after the launch of ETFs, it is advisable for investors not to buy ETH immediately. Instead, they should wait for the price to drop and then buy in batches to average out the cost. Investors can also go long on the ETH/BTC exchange rate, which has rebounded from 0.046% to the current 0.055% since late May.
MEXC is the preferred platform for investors, offering the lowest trading fees in the market. Users can choose to go long on ETH futures in cross margin mode on MEXC and go short on BTC to achieve higher returns. For those who prefer to hold rather than trade frequently, you can deposit ETH into MEXC to participate in Savings for a flexible APY of 4.8%.
Additionally, as the price of ETH rises, the dormant altcoin sector might see a surge, especially with this year's Meme projects gaining widespread popularity. MEXC has performed exceptionally well with Meme projects, being the first to list several projects including MAGA and BOME. Users who bought in early have seen returns exceeding 1,000%.
Disclaimer: This information does not provide advice on investment, taxation, legal, financial, accounting, consultation, or any other related services, nor does it constitute advice to purchase, sell, or hold any assets. MEXC Learn provides information for reference purposes only and does not constitute investment advice. Please ensure you fully understand the risks involved and exercise caution when investing. The platform is not responsible for users' investment decisions.