Cryptocurrencies, spearheaded by Ethereum, experienced a significant surge following a tweet from Bloomberg analysts suggesting a high probability that Ethereum-based basket funds (SPOT) might soon receive approval from the US Securities and Exchange Commission (SEC). This anticipated approval would allow Ethereum to be traded on standard platforms similar to stocks, offering easier access for investors. A comparable development had recently facilitated Bitcoin’s entry into Wall Street, boosting its mainstream acceptance.

Market Reaction

Following the speculation, Ethereum’s value soared by approximately 20% within a day, reaching over $3,600 per coin, its highest in nearly three months. Bitcoin also saw gains, surpassing the $70,000 mark. Prior to these rumours, market sentiment largely doubted the SEC’s likelihood of approving these funds, thus explaining the surge in optimism.

The surge in market confidence followed tweets from two Bloomberg analysts on X, who raised their estimated probability of SEC approval for Ethereum-based hedge funds from 25% to 75%. One analyst hinted at potential changes in the SEC’s stance, noting a possible policy shift. This comes amidst widespread scepticism among crypto investors towards the SEC and its chairman, Gary Gensler, who were not expected to greenlight such funds.

Political Influences

Shahar Cohen, CEO and founder of Lucid Capital from Tel Aviv, suggests that political factors may have influenced the analysts’ revised estimates. Cohen points to statements by former President Donald Trump, advocating for deregulation and suggesting a replacement for the SEC chairman. In response, President Biden has reportedly pressured Gensler to approve the Ethereum funds, potentially altering the regulatory landscape.

Implications of Approval

Historically, crypto-based basket funds have used contracts rather than directly tracking the currency. Approval of SPOT funds would mean companies could offer financial products directly tied to Ethereum’s performance. These companies would need to hold the digital currency as an underlying asset, making it easier for traditional investors to participate in the crypto market without needing to use crypto exchanges.

The approval of these funds could significantly boost demand for Ethereum, potentially increasing its value. Additionally, it would integrate the cryptocurrency ecosystem more closely with traditional financial systems, providing a more secure and accessible investment avenue. This mainstream integration could reduce the reliance on digital wallets and the risks associated with crypto exchanges.

It’s important to note that Bitcoin-based hedge funds received SEC approval earlier this year following extensive deliberation. However, a crucial distinction between the two cryptocurrencies lies in their classification. Bitcoin is categorized as a “commodity,” while Ethereum is considered more akin to a security. This classification subjects Ethereum to stricter regulatory requirements, which has hindered its acceptance relative to Bitcoin.

Market Impact and Future Prospects

Following the approval of Bitcoin funds, Bitcoin saw a significant value increase, reaching an all-time high of $74,000. This rise also positively impacted other leading cryptocurrencies, with Ethereum achieving a peak value of about $4,000 at the time. Investors now hope that Ethereum’s inclusion in the financial mainstream will similarly boost its value.

While the approval of Ethereum funds could drive increased demand and value, it remains uncertain if these expectations will fully materialize. Ethereum’s lower profile compared to Bitcoin might deter some cautious investors from entering the crypto market, despite the newfound accessibility and security offered by the potential SEC approval.

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