Ethereum futures ETFs: a game changer for the crypto market?
- 7 minute read
✔️ Positive signs point to new approvals of Ethereum futures ETFs, which could affect the crypto market and Ethereum.
✔️ ETFs (Exchange-Traded Funds) are mutual funds that are exchange-traded and offer diversification, while futures are financial contracts for future purchase or sale of assets.
✔️ Several financial institutions, such as BlackRock and Grayscale, are working on Bitcoin ETFs and Ethereum Futures ETFs.
✔️ The decision on approval lies with the SEC, which is under pressure due to strict regulation in the crypto sector. Approval could lead to more crypto-ETFs and possibly a more positive rating of Ethereum.
Green light for multiple Ethereum futures ETFs? Everything points to a green light and positive news. What does this mean for the crypto market, Ethereum and the SEC. The positive news surrounding Blackrock and Grayscale's Bitcoin ETF are creating positive waves and green numbers in the crypto sector. Indeed, Bitcoin went to its highest point in the past year. With the positive sounds surrounding a Bitcoin ETF, rumours surrounding Ethereum also logically emerge. For instance, new Ethereum futures ETFs are said to get the green light next week. But what exactly is an ETF and what is a futures? Let's get all the facts straight.
Table of Contents
What is an ETF?
An Exchange-Traded Fund (ETF) is an exchange-traded mutual fund similar to individual stocks. The main feature of an ETF is that it tracks a diversified portfolio of assets, such as stocks, bonds, commodities or, in this case, Bitcoin, and trades them on the exchange via shares. ETFs allow investors to diversify and gain exposure to different markets and sectors in a simple and cost-effective way. In this case, the crypto sector. ETFs are popular because of their liquidity, low management costs and transparency, making them an accessible and flexible investment choice for both novice and experienced investors. Companies such as Blackrock and Grayscale have been working to bring a Bitcoin ETF to market for some time. The rumors that the approval is coming immediately created positive prices in the market.
What are futures?
A futures product, often referred to as "futures," is a financial contract in which buyers commit to buy a particular asset (such as commodities, currencies, stock indexes or, in this case, Bitcoin), while sellers commit to sell that same asset at a predetermined future date and price. These contracts are typically traded on standardized exchanges, with the contract size and expiration date uniformly defined. Futures have a variety of uses, including price risk management and speculation.
Futures contracts allow investors to profit from price movements in assets without owning the actual assets. They are widely used by investors and traders for hedging risk, such as farmers who want to protect against price fluctuations when selling their crops, and for speculation, such as traders anticipating future price increases or decreases, something common with Bitcoin. Exchanges like Binance and CME Group offer Bitcoin futures. Now there are the first sounds of new Ethereum futures product on traditional financial exchanges.
What is the difference between ETFs and futures?
An ETF (Exchange-Traded Fund) is like a basket of different investments that you can buy on the exchange, like a stock. A futures contract is an agreement to buy or sell an asset in the future at a predetermined price, without owning the asset itself. If we were to translate this to Bitcoin, you can talk about the following:
A Bitcoin ETF is like a stock you buy on the exchange that tracks the price of Bitcoin, while a Bitcoin futures contract is an agreement to buy or sell Bitcoin in the future at a predetermined price, without actually owning Bitcoin.
VanEck and Valkyrie Future ETFs.
Much indicates that the launch of new Ethereum futures is imminent. Although an initial variant did not bring the expected hype, a month later the market is in a different state.
Asset manager Valkyrie announced yesterday that it will convert its Bitcoin futures ETF into a blended financial futures product of the combination Bitcoin and Ethereum. VanEck also announced its own futures ETF, with a launch date of Oct. 3. Trend watchers and blockchain experts at Bloomberg believe the launch will take place "as early as next week." The SEC has not yet officially confirmed approval of the application. Approval of the futures could have a bullish effect on the market and Ethereum.
The impact on Ethereum
Futures are "only" derivatives. In fact, with derivatives you do not own the underlying product yourself. Nevertheless, they indirectly influence the price and stimulate the market. As mentioned earlier, there is already a futures ETF for Bitcoin. Upon acceptance, this had an immediate positive effect on the Bitcoin price. For Bitcoin, the futures ETF is another indirect investment opportunity. Investors can also decide to mine Bitcoin, for example. Ethereum, on the other hand, has hardly any alternative access for investors. Moreover, Ethereum's market cap is significantly lower than Bitcoin's. Therefore, new inflows have a greater impact.
Moreover, the futures pave the way for a possible spot ETF, the product that Grayscale and BlackRock are now working on for Bitcoin. Felix Hartmann, digital securities expert at Hartmann Capital, elaborates, "While an ETH futures ETF would give investors easier access to the largest smart contract platform, the real potential lies in a Staked ETH Spot ETF. This would be cheaper for investors than futures and could even generate dividends through staking."
The decision lies with the SEC
Last but not least, the endorsements also affect the Securities and Exchange Commission. For the SEC and its chairman Gary Gensler are under pressure. The reason: strict laws and regulations against the crypto sector. Not only industry representatives, but also American politicians accuse Gensler and the SEC of abusing their powers. Just this week, Gensler had to answer to the House of Representatives. If the SEC rejects the upcoming applications, the pressure will increase. The legitimacy of the decision would be seriously questioned.
Thus, the adoption of a futures ETF is closely tied to the adoption of the Bitcoin ETF. The crypto sector is hoping that a Bitcoin spot ETF (or simply Bitcoin ETF) from financial giants like BlackRock and Grayscale will finally get the big institutional money flowing into the market. However, the applications are still being delayed by the SEC. The next deadlines expire in January. Still, the market seems to be already anticipating good news.
" Similar to how bitcoin futures ETFs paved the way for ETH futures ETFs, a Bitcoin spot ETF could lead to a number of other crypto ETFs," Hartmann continues. He continues, " The SEC is under pressure from both Congress and the courts to approve spot ETFs. This could spell the end of the SEC's regulatory pressure regarding cryptocurrencies."
In addition, allowing the applications could play into the hands of the SEC when it comes to classifying cryptocurrency ETH." Overall, new ETH futures ETF 's would be a strong signal that the SEC tends not to view Ethereum as a security and classifies it the same way as Bitcoin, making Ethereum extremely stronger in the long run, "
Conclusion
The approval of Bitcoin ETFs has already had a positive effect on the price of Bitcoin, and Ethereum now hopes to benefit from similar approval. However, the final decision lies with the SEC, which is under increasing pressure due to regulation in the crypto sector. The approval of new Ethereum Futures ETFs would not only provide new investment opportunities, but also call into question Ethereum's classification as a security, which could benefit Ethereum in the long run. The coming months will be crucial for the approval and further development of crypto-ETFs.