Proactive Investors - US regulator the Securities and Exchange Commission (SEC) has given the formal nod for numerous spot-Ethereum exchange-traded funds.
According to etf.com, the ETFs will commence trading when US markets open today, marking a historic day for the world’s second-largest cryptocurrency.
Spot-Ethereum ETFs will give traders access to the cryptocurrency on the traditional stock market for the first time, potentially opening up billions of dollars worth of institutional investment.
Earlier this year, the SEC approved spot ETFs tracking the world’s largest cryptocurrency bitcoin, kicking off a rally that sent it to an all-time high against the US dollar.
Ethereum proponents have struggled to convince the regulators to approve Ethereum-based ETFs because of the perceived volatility and inherent risk of the underlying asset.
But as traditional financial institutions increasingly seek access to the cryptocurrency markets on behalf of their customers, the SEC has become more welcome to the idea of crypto-linked exchange-traded products.
Among the heavy hitters are the Grayscale Ethereum Mini trust (ETH), the VanEck Ethereum ETF (ETHV), the Fidelity Ethereum Fund (FETH) and the BlackRock (NYSE:BLK) iShares Ethereum Trust (ETHA).
Franklin, Bitwise, 21 Shares and Invesco also have ETH ETF products.
Most providers have selected Nasdaq-listed cryptocurrency exchange Coinbase Global Inc (NASDAQ:COIN) as their custodian, although VanEck has gone with Gemini, the crypto exchange owned by the Winklevoss Twins.
Fidelity is using its own custodian services.
What is Ethereum?
Technically speaking, the SEC has approved spot-ether ETFs, not spot-Ethereum ETFs.
Ethereum is the blockchain software used to deploy decentralised applications (dApps) while ether is the cryptocurrency used to power these dApps and pay transaction fees.
Ether can be thought of as a proxy of the popularity and success of Ethereum as a software platform.
This makes ether and bitcoin vastly different digital currencies.
While bitcoin is the original, and some might say only true, decentralised currency primarily used for peer-to-peer transactions, ether’s use cases are far more diverse.
Ether facilitates NFT trading, decentralised finance (DeFi) transactions and crucially, the launch of other cryptocurrencies on the Ethereum blockchain.
Thus ether is the gold standard of ‘utility tokens’, being the cryptocurrencies used for greater purposes than P2P transactions and speculative trading.
Ethereum and the ether token were launched in 2014 by eight co-founders, most notably Russian-Canadian computer scientist Vitalik Buterin.
As of Tuesday, 23 July, ether had a market capitalisation of $415 billion with an individual token price of $3,450.