The approval of these new tools represents a possible injection of trillions of dollars into the cryptocurrency ecosystem.
After approving spot bitcoin (BTC) exchange-traded funds (ETFs) last January, the United States Securities and Exchange Commission (SEC) has given final approval to spot ethereum (ETH) ETFs, thus opening a new chapter for the second largest cryptocurrency on the market.
Ethereum exchange-traded funds are an investment tool that facilitates the process of exchanging securities on the stock market, as if they were traditional (ordinary) stocks. Their greatest characteristic is that ETFs are traded on secondary exchanges and are an investment vehicle in the traditional financial world.
The approval of these new tools represents a possible injection of trillions of dollars into the cryptocurrency ecosystem. ETF operators, such as Blackrock, VanEck, ARK Investment or Grayscale, among others, will not directly custody the Ethereum they trade, which should remain on cryptocurrency exchange platforms, thus giving a boost to all centralized exchanges.
For Leif Ferreira, CEO and co-founder of Bit2Me, “just as happened with the approval of Bitcoin ETFs by the Hong Kong Stock Exchange, or the ETPs in London, this news is a sign that global adoption is approaching. of cryptocurrency. These events will help increase the level of credibility and legitimacy of cryptocurrencies. “This is why we welcome this ETF, which supports our belief that cryptocurrencies in general are the future of finance.”
What is a spot ETF?
A spot ETF is a type of ETF that has a direct relationship to the current or “spot” price of a particular asset. For example, buying a 100,000 Euro stake in an Ethereum ETF means that the fund offering that ETF would buy those 100,000 Euros in Ether (ETH) at a “spot” price, holding it through a cryptocurrency exchange. At the same time, the fund would notify that the purchase has been made and the buyer could see said ETF purchase and the desired amount on a dashboard. In this way, the ETF will guarantee, in functional and regulatory terms, the same price level of an ETH.
The advantage is that an ETF offers large investors and organizations a new, simple, convenient, well-known and regulated way to access the price of Ethereum, in the same vein as they can through centralized exchange platforms like Bit2Me.
The approval of Ethereum ETFs has some important implications:
● Ethereum Legitimization: The approval of Ethereum ETFs by a regulatory institution such as the United States Securities and Exchange Commission is an important step towards legitimizing ETH as a mainstream financial asset. This will increase investor confidence.
● Greater liquidity: By offering a new way to invest in ETH, an ETF could attract more market participants, increasing Ethereum's liquidity. This could lead to lower price volatility in the long term.
● Regulation and supervision: The existence of an Ethereum ETF implies greater regulation and supervision in the Ethereum market. This could, as a result, provide greater investor protection and help prevent fraudulent practices in the market.
● Impact on Ethereum price: Approving the Ethereum ETF could have a significant impact on the price of Etherium, positively or negatively, depending on market perception and investor reaction.
● Innovation in financial products: Approving an ETF could push innovation in financial products linked to cryptocurrencies, leading the creation of more financial instruments for the crypto market.
