An Ethereum (ETH -1.87%) exchange-traded fund (ETF) was approved this week, and that could open a floodgate of ETFs and funding for the crypto industry. At least that’s what the market was speculating this week.
According to data provided by S&P Global Market Intelligence, Uniswap (UNI 13.42%) was up as much as 28% over the past week, while Lido Staked Ether (STETH -2.62%) was up 25.3% and Arbitrum (ARB -4.84%) was up 17.9%. The three tokens are currently trading up 21.7%, 18.9%, and 11.2%, respectively as of 3:30 p.m. ET on Friday.
Ethereum gets its ETFs
This week, the U.S. Securities and Exchange Commission, or SEC, approved a spot Ethereum ETF, following the approval of Bitcoin (BTC 1.41%) ETFs earlier this year. This was a bit of a surprise to the industry because there have been questions as to whether or not Ethereum would be seen as a commodity or a security. If it was a commodity, like Bitcoin, an ETF makes sense, but a security wouldn’t have been approved.
Approving an Ethereum ETF indicates that Ethereum is a commodity, and it’s likely other crypto tokens will follow the same path. We could see this open the door to similar tokens that have similar characteristics like the ability to deploy smart contracts on the blockchain.
Dragging the industry forward
When Bitcoin ETFs were approved, the market pulled a number of tokens higher. This week’s move had the biggest impact on Ethereum-related tokens. Ethereum itself is up 20.9% over the past week and popped when speculation began swirling that ETF approval was coming.
It’s no surprise, then, that Lido Staked Ether followed suit and Uniswap, which is a decentralized exchange on Ethereum, followed as well. More value and usage on Ethereum should be good for the ecosystem.
Arbitrum is a Layer 2 blockchain, which means it’s built on top of Ethereum and aims to make Ethereum “more inclusive and sustainable” with scaling technology. Like the other tokens built on Ethereum, an ETF could mean either increased usage of Ethereum and/or an ETF including tokens like Arbitrum in the future.
The rising tide lifts altcoin boats
Like the Bitcoin-fueled run earlier this year, Ethereum’s ETF approval is causing speculation about what will be next from the SEC and the market. We know that Bitcoin ETFs attracted tens of billions of dollars of investment and it’s possible Ethereum, which is the second-largest token by market cap, could do something similar. I wouldn’t think it would be as popular as Bitcoin, but any increase in funds coming to the Ethereum ecosystem would be a positive.
What’s less clear is what’s next, and that’s where a lot of this week’s speculation is coming from. Are altcoin ETFs coming? Will meme coins get an ETF?
I think it’s clear the SEC is loosening its objections to crypto after losing a number of court battles, and that could open up the industry to more funds and ultimately use cases long-term. That’s extremely bullish for crypto, but there will be plenty of volatility on the path to a sustainable industry.
Travis Hoium has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and Uniswap Protocol Token. The Motley Fool has a disclosure policy.
