Cryptocurrencies surged higher on Tuesday amid growing optimism about the SEC's upcoming decisions on spot Ethereum exchange-traded fund (ETF) applications, with the first decision expected this week. In the wake of the reports, analysts are voicing their expectations on how a potential approval would affect Ethereum prices.
Ethereum ETF saga sees new developments
The crypto rally on Tuesday was chiefly led by Ether, with the world’s second-largest crypto asset surging more than 22% to $3,781.
Adding to the speculation was a report by CoinDesk, which, citing sources familiar with the matter, said that the SEC had asked exchanges to update their 19b-4 filings on an accelerated basis, signaling potential approval of these applications ahead of a key deadline on Thursday.
However, this does not guarantee the authorization of Ethereum ETFs, the report added.
Issuers must also have their S-1 applications approved before the products can start trading. The SEC can take an indefinite amount of time to approve the S-1 documents, as it is not bound by a deadline, per the report.
One company in discussions with the SEC reportedly suggested it might be on the right track for approval, a notable shift from weeks earlier when it felt the SEC was delaying.
Bloomberg Intelligence ETF analysts hiked the odds of spot Ethereum ETF approval to 75% from 25% after hearing that the SEC might be adopting a more favorable stance toward the applications.
The broader crypto market tracked Ethereum price gains. Bitcoin climbed 6% on the day, while XRP, ADA, and DOGE jumped 5.8%, 6.9%, and 10.3%, respectively.
“This sudden flip in expectations is an unexpected boon for investors who have been crying out for a driver after the [Bitcoin] halving passed and bitcoin ETFs were launched in the U.S. and Hong Kong,” said Antoni Trenchev, co-founder and managing partner of Nexo.
“If the spot ETH ETFs are approved, altcoins should take off as ether is often a leading indicator for the rest of the crypto market.”
If the reports are true, it marks significant progress from previous expectations as many expected the SEC to deny Ethereum ETF applications this week due to concerns over the complexity and regulatory challenges associated with Ether compared to Bitcoin.
The lack of a legal precedent similar to Bitcoin's ETF approval further complicates the issue, with SEC Chair Gary Gensler recently stressing the need for investor protection and compliance with securities laws.
Ethereum price forecast
In their comments on the aforementioned developments, Bernstein analysts said Tuesday that given Bitcoin's 75% rally since the ETF approval, they would expect a similar surge in Ethereum prices. Moreover, they note that ETH's free float and supply appear even more attractive than Bitcoin's.
“ETH since its transition to proof of stake, has been deflationary. Further, 38% of ETH is locked in staking, financial smart contracts and layer 2 chains - feature unique to programmable ETH and not seen with Bitcoin,” Bernstein analysts said.
“66% of ETH supply has not moved in last 1 year (similar holding behavior as Bitcoin) and supply on exchanges is at all-time-low. Thus, ETH supply remains constrained by sticky investors and utility locking supply in financial smart contracts,” they added.
Earlier this year, Standard Chartered (OTC:SCBFF) analysts said they expect the SEC to approve Ethereum ETFs on May 23, aligning with the timeline for Bitcoin ETFs approved in January 2024.
The bank predicted significant inflows for the crypto asset, estimating 2.39-9.15 million ETH, which amounts to between $15 and $45 billion, in the first year post-approval.
If approved, Standard Chartered anticipated that Ethereum prices would keep pace with BTC, maintaining the current 5.4% price ratio through 2024. Given their projection of BTC reaching $150,000 by the end of 2024, this implies an Ethereum price of around $8,000.