Following the First Bitcoin ETF, Ethereum Might be Next

With this week’s launch of the first bitcoin futures-backed ETF in the US now behind us, the market is already full of speculation about what comes next: An ethereum (ETH) ETF, a spot-based bitcoin ETF, or something else?

According to analysts, ETH should be the next digital asset in line to have an exchange-traded fund (ETF) backed by it. After all, the asset, like bitcoin, is traded on the regulated futures market that is the Chicago Mercantile Exchange (CME), which the US Securities and Exchange Commission (SEC) Chair Gary Gensler has previously hinted is necessary for any crypto-related ETF to be approved.

Further, we also know that the two major ETF providers ProShares and VanEck have previously filed proposals for ethereum-backed ETFs with the SEC, although both firms were later asked by the regulator to withdraw their applications. However, other ETH-based ETF proposals are still pending with the SEC, including one by Kryptoin Investment Advisors.

Just like the case was for bitcoin, an ethereum ETF is already listed in Canada, provided by CI Global Asset Management. In addition, a number of other exchange-traded investment vehicles that track the price of ETH are also listed in several European countries. 

“Going to start the campaign now for the SEC to approve an Ethereum ETF. Might as well get ahead of the crowd, because it’s coming eventually,†the popular crypto trader Scott Melker, also known as The Wolf Of All Streets, said earlier this month.

And while speculation continues about a potential ethereum ETF, the new bitcoin ETF has already established itself as a serious challenger for the Grayscale Bitcoin Trust (GBTC), which until this week was the main regulated bitcoin investment vehicle in the US.

According to data from crypto analytics firm Glassnode, the Trust is currently trading at a discount of about 20% relative to the market value of the bitcoin it holds, which suggests that traders are turning away from the once-popular investment vehicle.

The large discount was also pointed out today by Bloomberg’s senior commodity strategist and noted bitcoin bull, Mike McGlone, although he suggested that the Trust still remains a more attractive choice for “buy-and-hold types†than the futures-based ETF is.

A roughly 20% discount for the Grayscale #Bitcoin Trust (GBTC) vs. a steep futures contango may represent two key forces: Help for Bitcoin's price and pressure on volatility. We see buy-and-hold types tilting toward GBTC and the more tactical focusing on futures-based ETFs. pic.twitter.com/JjmZzcwXGL

— Mike McGlone (@mikemcglone11) October 20, 2021

However, as mentioned repeatedly by Barry Silbert, founder & CEO of Digital Currency Group, Grayscale’s parent company, the Trust has already applied to the SEC to convert its shares to an ETF. This message was also reiterated by Silbert on Twitter on Tuesday, where he emphasized that it is a spot-based, and not a futures-based, ETF the company is aiming for.

Grayscale and @NYSE formally kicked off the process this morning to convert $GBTC into the first spot-based bitcoin ETF

Upon conversion, the Grayscale Bitcoin Trust will trade under the ticker symbol $BTChttps://t.co/hev2bWb4r0

— Barry Silbert (@BarrySilbert) October 19, 2021

Moreover, as reported by Forbes last month, Grayscale may even be paving the way for ETFs based on other cryptoassets, including bitcoin cash (BCH), ethereum classic (ETC), and litecoin (LTC).

According to the report, three of the company’s other digital asset trusts, namely the Grayscale Bitcoin Cash Trust (BCHG), Grayscale Ethereum Classic Trust (ETCG), and Grayscale Litecoin Trust (LTCN), have been designated as so-called SEC reporting companies.

This means that the trusts will be regulated in a similar manner as publicly traded companies in the US, and be required to file regular disclosures with the SEC. And judging from Forbes’ director of digital asset research, Steven Ehrlich, this could mean that the SEC is warming up to the idea of allowing crypto ETFs that are not backed by CME-traded futures contracts.

“The CME can only offer bitcoin and ether products, at least for now,†Ehrlich wrote, while adding that these other potential ETFs will therefore not face competition from futures-backed ETFs “if the SEC opens the floodgates and they become ETFs in the future.†

For now, however, SEC’s Gary Gensler has not given any indication that he may be open to allowing “physically†backed spot ETFs for digital assets any time soon. But the crypto community still remains hopeful, and the discussion continues on what will be the next major driver for mainstream adoption of crypto as an asset class.

At 16:50 UTC, ETH traded at USD 4,098 and was up by 8% in a day and 17% in a week. The price rallied by 979% in a year.
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Learn more: 
– First Bitcoin ETF Booms, BTC Nears USD 65,000
– ‘Risk-Free’ Trade Makes Comeback as Bitcoin ETF Fuels Futures Premiums

– Experts Disagree on Prospects of Bitcoin ETF in 2021 as Deadline Nears
– Ethereum Merge Estimated in May-June 2022 – Developers