Ethereum outperforms Bitcoin's rise

Year-to-date increase rate

Ethereum (ETH), the second-largest crypto asset (virtual currency) by market capitalization, has surpassed Bitcoin (BTC) in price growth rate since the beginning of the year. This is partly due to optimism that an Ethereum spot ETF is likely to be approved, following last month's approval of a Bitcoin spot exchange-traded fund (ETF) by U.S. regulators.

The Ether token is outshining Bitcoin this year partly on speculation that the next wave of spot US crypto exchange-traded funds will focus on the second-largest digital asset https://t.co/XM12Tps2iz

— Bloomberg (@business) February 21, 2024

On the 21st, Ethereum exceeded 1 ETH = $3,000 for the first time since April 2022, marking a year-to-date increase of 28%, outpacing Bitcoin's 21%. Ethereum price has since fallen and is currently trading at $2,924 at the time of writing.

Currently, nine Ethereum ETF listing applications have been registered with the U.S. Securities and Exchange Commission (SEC), including major asset management companies BlackRock and Fidelity. Determination on whether or not to apply has been postponed. The decision on Grayscale's Ethereum spot ETF conversion application has also been postponed again.

Some believe that the SEC's postponement is as expected, and attention is focused on what decision the SEC will make on applications such as VanEck and ARK Invest, whose final deadline for approval or disapproval will be in late May.

Stefan von Haenisch, head of trading at crypto investment firm OSL Singapore, predicted that Ethereum will continue to outperform Bitcoin in April and May, when the ETF approval deadline approaches.

Possibility of ETF approval

Experts are divided on the likelihood of an Ethereum spot ETF being approved.

J.P. Morgan believes that the SEC is unlikely to approve it in May due to the need to clarify Ethereum's security status. Haenisch, who was quoted earlier, also mentioned the SEC's strong stance and suggested that it may not approve.

U.S. investment bank TD Cowen predicts that approval of an Ethereum spot ETF could take place in late 2025 or early 2026, due to political factors such as this year's U.S. presidential election.

Regarding the feasibility of an Ethereum ETF, SEC Chairman Gensler said, “In the case of the Bitcoin ETF product, our decision was to limit it to Bitcoin, a non-securities product, and not other virtual currencies. It should not be read as implying that it also approves of

connection:JP Morgan analyzes the possibility of Ethereum spot ETF approval by May as “50% or less''

Meanwhile, Standard Chartered Bank (SCB), a major British bank, has expressed a bullish stance on approval.

Geoff Kendrick, head of foreign exchange and digital assets research at the bank, said the SEC does not explicitly classify Ethereum as a security and that Ethereum futures are listed on the Chicago Mercantile Exchange (CME). Based on this, we expected it to be approved in May. Furthermore, he mentioned Grayscale's application to convert the Ethereum investment trust into a physical ETF. If the company is not approved, there is a precedent where the SEC lost a lawsuit regarding the company's Bitcoin ETF conversion application, so the SEC seems to think that there is a high possibility that the company will not follow the same path.

connection:SCB Silver Bullish prediction that SEC will approve Ethereum spot ETF in May

On the 21st, Paul Grewal, chief legal officer of Coinbase, a major U.S. exchange, submitted an opinion to the SEC requesting approval of Grayscale's application for conversion from the Ethereum Trust.

Today @coinbase responded to @SECGov's request for comment on the proposed @Grayscale Ether Trust ($ETHE) ETP. 27 pages and 96 citations that provide the (1) legal, (2) technical, and (3) economic rationale for approval. 1/6

— paulgrewal.eth (@iampaulgrewal) February 21, 2024

“Ethereum's estimated dollar trading volume significantly exceeds that of most stocks in the S&P 500, including when adjusted for market capitalization.” “The depth of the Ethereum market, tight spreads, and price correlation across the physical market strongly suggest a market that is resistant to fraud and manipulation.”

Ethereum ETFs may increase concentration risk

Some of the Ethereum spot ETF applications filed with the SEC include ETFs that incorporate staking, but if such investment products are approved, there is a risk of validator concentration within the Ethereum network. It has been pointed out that there is a possibility that the

Ark Invest and Franklin Templeton have filed for staking-enabled ETFs, which aim to generate additional yield by staking ETH.

Andrew O'Neill of the S&P Global Digital Asset Institute and colleagues say that while physical ETFs that simply hold Ethereum will not impact validators, Ethereum physical ETFs that incorporate staking will “It is possible that it will become larger enough to change the concentration of validators,'' he pointed out.

Currently, the largest validator on the Ethereum network is decentralized staking protocol Lido Finance, followed by Coinbase. According to data from Dune Analytics, Lido controls 31.7% of the staked ETH and Coinbase controls 14%.

Analysts believe that major U.S. asset management companies are unlikely to choose the decentralized protocol Lido when offering stakingable physical ETFs, potentially reducing the concentration of validators on Lido. He pointed out that there is.

On the other hand, he expressed concern that Ethereum staking could become increasingly concentrated on Coinbase, which already plays a major role as a custodian for institutional investors.

Coinbase is the custodian of eight of the 11 U.S. Bitcoin ETFs and has been designated as the staking institution by three of the four largest non-U.S. Ether staking ETFs, according to analysts. .

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