The US Securities and Exchange Commission is likely to allow exchange-traded funds to hold the cryptocurrency ethereum in May, Standard Chartered predicts.
23 May is the last date by which the agency must consider ETF applications from VanEck and Ark 21Shares, the bank said in a research report on Tuesday. The asset managers will be the first to come up against the final deadline.
Standard Chartered expects the SEC to rule on the applications on the final date, as it did on 10 January, when it approved 10 bitcoin ETFs. Ethereum 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 US$285-billion, ether is the second largest cryptocurrency in market value after bitcoin.
Kendrick expects ether’s price to rise to $4 000 by the projected 23 May approval date, assuming that it follows a trading pattern similar to bitcoin through the ETF approval process. Ether traded at about $2 370 on Tuesday.
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.
Less vulnerable
Ether is expected to avoid much of the sell-offs that bitcoin experienced post-ETF approval, Standard Chartered said. Bitcoin fell as much as 20% 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 holds a smaller portion of the total market capitalisation of ether, compared with the bitcoin held in GBTC.
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“These factors should make ETH less vulnerable than BTC to a post-approval sell-off,” Kendrick wrote. — Elijah Nicholson-Messmer, with Isabelle Lee, (c) 2024 Bloomberg LP