Lucas Kiely, the Chief Investment Officer for Yield App, shared his insights on the potential approval of spot Ethereum (ETH) Exchange-Traded Funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) in an opinion piece published by Cointelegraph on 23 January 2024. His perspective comes from a background of extensive experience in investment portfolio management and a deep understanding of the crypto market.
Kiely began by acknowledging the recent approval of a Bitcoin spot ETF, a development that was long-awaited and somewhat unexpected in the industry. He then shifted focus to the next significant milestone for the crypto market: the approval of an Ether spot ETF. Contrary to the prolonged and contentious process that surrounded the Bitcoin ETF, Kiely believes the approval of an ETH spot ETF is not only certain but imminent.
He criticized the SEC’s past denials of Bitcoin ETF applications, which he attributed to prejudice against Bitcoin. This prejudice, according to Kiely, was finally overcome due to Greyscale’s lawsuit. He referenced Commissioner Hester Peirce’s critique of the SEC’s handling of these approvals, noting that the denials never made sense and eroded trust in the SEC. Peirce’s comments highlighted the unnecessary complexity and “circus” surrounding crypto products, which Kiely believes will not be the case with an Ether ETF.
Kiely said that there are currently seven ETH spot ETF applications on the SEC’s desk, with VanEck’s application being the first in line with a deadline of 23 May 2024. Kiely pointed out that the SEC has already instituted proceedings on VanEck’s applications, making it difficult for the regulator to find a reason for denial without affecting other pending applications. This situation, he argues, is why the market is confident about an approval in May.
Kiely also mentioned that the approval of an ETH product would pave the way for a variety of crypto-backed or linked Exchange-Traded Products (ETPs), from spot products to more complex instruments. He acknowledged that liquidity might be the only potential obstacle for an ETH spot ETF approval. He mentioned that Ethereum’s move to proof-of-stake has constrained the supply of ETH, and unlike Bitcoin, which is used mainly as a store of value, ETH is a working currency used for transactions on its chain. However, Kiely views this concern as a long shot and not significantly different from liquidity issues in equity markets.
He concluded by stating that the delay in approving a Bitcoin ETF was due to politics and the SEC’s uncertainty about embracing this new asset class. With the approval of the spot Bitcoin ETFs in the U.S., he believes that cryptocurrency has not only entered traditional finance (TradFi) but is now firmly established within it. Kiely anticipates not just the approval of a spot ETH ETF but a full-scale institutional colonization of the cryptocurrency industry.
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