ARK Invest and 21Shares have been the latest prominent players to apply for an Ethereum futures exchange-traded fund (ETF). The application was co-filed with the U.S. Securities and Exchange Commission on August 24, 2023.
Will high-profile applicants tip the scales for an Ethereum ETF?
The two products are called ARKZ and ARKY. According to the filing, ARKZ would distribute at least 25% of its assets in cash-settled Ethereum futures contracts.
These contracts are traded on the Chicago Mercantile Exchange (CME). On the other hand, ARKY would be an investment distribution of Bitcoin and Ethereum futures contracts. Empowered Funds would be the investment advisor for both ETFs.
ETH ETF Blast Off?
Ethereum futures are contracts that allow investors to buy or sell Ethereum at a predetermined price on a future date. This gives investors the opportunity to profit from the future price movements of Ethereum without having actually to own the underlying cryptocurrency.
Approving these ETFs would make it easier for investors to gain exposure to Ethereum. Currently, there are no ETFs that directly invest in Ethereum. That being said, the approval of these ETFs would also give investors confidence that they are investing in a safe and transparent product. This potentially attracts new investment into the crypto space.
Bloomberg reported last week that the SEC could greenlight ETFs based on Ethereum futures.
The move came amid the ongoing race in Bitcoin ETF and Ethereum ETF. There are currently at least seven institutional firms on the waiting list for potential approval of Ethereum futures products. These include Volatility Shares, Bitwise, Roundhill, VanEck, Proshares, Grayscale, and ETF Direxion.
Volatility Shares was the first organization that proposed an Ethereum ETF this year. According to the filing in July, their product, called “Ether Strategy ETF,” will reference prices from Ethereum futures contracts. The fund will also be traded on the Chicago Mercantile Exchange (CME) if approved.
Next Stop ETH Rally!
The SEC is still reviewing the proposals for both Bitcoin and Ethereum ETFs. It is not clear when the SEC will decide on whether to approve the ETFs. However, we’re unlikely to see an official decision within this year.
While news sheds positivity on Ethereum ETFs, Bitcoin spot ETFs could face challenges. The SEC previously rejected all applications to launch a spot Bitcoin ETF.
The securities regulatory authority has recently postponed its decision regarding the ARK 21Shares’ Bitcoin spot ETF. This collaborative effort between Cathie Wood’s investment firm and 21Shares was initiated in 2021 before BlackRock refueled the movement in May this year.
The regulatory body repeatedly extended the timeline for evaluating Bitcoin ARK 21Shares ETF. The initial filing for this cryptocurrency investment vehicle was submitted to the federal regulator in May.
Subsequently, the regulator has twice extended the period within which approval or disapproval could be granted, first in July, extending the approval period, and then in August, allowing for a comment period.
Following the rejection of their application, digital asset manager Grayscale took legal action against the SEC, asserting that the denial of a Bitcoin ETF was based on arbitrary, capricious, and discriminatory grounds.
Many crypto members are excited and optimistic about the potential approval of these ETFs. Shortly after BlackRock’s filing emerged on June 15, the price of the flagship crypto skyrocketed from $25,000 to over $31,000.
The name BlackRock has also been questioned, as the giant has not yet joined the Ethereum race. The participation of BlackRock would raise the number of Ether ETF applications.
An approval could trigger a remarkable surge in Bitcoin’s value. It would not only signify a milestone in cryptocurrency’s journey toward mainstream acceptance but also attract a surge of institutional and retail investors.
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Author: Nicholas Say