New ETH spot ETFs could be a BIG deal 🚀

Hey everyone,

Hope you’re having a good Memorial Day weekend.  We’re headed over to our neighbor's place for a crawfish boil (She’s from Louisiana).  Will be a good time.

Very eventful, and unexpected week for crypto.  Nonetheless it’s very positive and something we should all be excited about.

The big news this week is the SEC approved applications for Ethereum spot ETFs. This could be very bullish for both Ethereum and Crypto generally for a couple reasons:

• They will boost buying demand by making it easier to buy

• They decrease the regulatory risk of investing in Ethereum

So how do Eth spot ETFs increase demand for Eth?

Adding Ethereum spot ETFs makes it much much easier for investors in traditional brokerage accounts (e.g., Schwab, Vanguard, Fidelity) to buy Ethereum.  There is a TON of money on these platforms.  Everything from your average Joe investors, to major pensions and endowments have money on these platforms…and soon they will have access to directly buy Ethereum via these ETFs. Its all about the flow of capital.

(Hint: Wall Street makes most of its money off of “flows”, which is just money moving into investments and they take a small cut. Wall Street is great at selling investments but not so great at figuring out which ones will be good investments.)

But that’s not the only way it increases demand…

Demand also increases by encouraging investors who previously bought Ethereum futures ETFs to buy Ethereum spot ETFs to save money on fees. The futures ETFs do not buy actual Ethereum, instead they just simulate the price action of Ethereum. The Ethereum spot ETFs actually buy Ethereum and therefore when investors buy the spot ETF they push the actual price up.

And what about decreasing regulatory risk? Is that bullish?

Approving Ethereum spot ETFs lowers regulatory risk because it means the SEC probably won't call Ethereum a security. If they did, Ethereum would have a tough time following securities laws made for traditional investments like stocks and bonds, which could make it practically illegal.

This isn't just good news for Ethereum; it also benefits other smart contract cryptos like Solana. If Ethereum isn't seen as a security, those assets probably won't be either.

The other way the Ethereum spot ETFs decrease regulatory risk is by creating a way for investors to buy Ethereum on regulated exchanges. This is key for large institutional investors who can’t afford to take the risk of buying on unregulated crypto exchanges.

Overall, this is great for Ethereum and the entire crypto market because investors hate uncertainty.

And to sum it all up…the market agrees 🙂 this is all bullish - see the spike?

Bitcoin also launched spot ETFs on Jan 11th 2024…and here is what happened in the market (see chart below). Similar price movement could be possible with Ethereum…it will all depend on investor appetite in traditional brokerages.

Whoa whoa are we out of the woods? Is it really this positive?

We should keep in mind that the applications for 8 Ethereum spot ETFs have been approved…but the SEC still needs to give final sign off before they can trade.  Those approvals are very likely to come…just a question of when.

Have a good week.

Cheers,

Justin

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