The US Securities and Exchange Commission (SEC) is reportedly ready to consider new applications for exchange-traded funds (ETFs) based on Ethereum futures contracts.
Several prominent investment firms, such as ProShares, VanEck, and Volatility Shares, have filed their proposals to offer this innovative product to investors who want to bet on the future price of the second-largest cryptocurrency.
How Ethereum Futures ETFs Work
Ethereum futures ETFs are investment vehicles that track the performance of contracts that promise to deliver Ether at a specified price and date in the future.
These contracts are traded on regulated platforms, such as the Chicago Mercantile Exchange (CME), which launched its Ether futures product in February 2021.
Investors who buy shares in an Ethereum futures ETF do not hold the underlying cryptocurrency directly but rather speculate on its price movements.
This way, they can gain exposure to Ether’s volatility and potential growth without dealing with the technical and regulatory challenges of holding and transferring digital assets.
Factors Influencing the Turning Point
According to Blockworks, two sources familiar with the matter have revealed that the SEC is now willing to review and discuss the possibility of approving Ethereum futures ETFs after previously advising firms to halt their efforts in May.
This change of attitude could be attributed to several factors, such as:
- The growing popularity and liquidity of Ether futures contracts on the CME and other platforms indicate a strong demand and interest from institutional and retail investors.
- The increasing adoption and innovation of Ethereum as a blockchain platform that supports various applications, such as decentralized finance (DeFi), non-fungible tokens (NFTs), and smart contracts.
- The ongoing transition of Ethereum from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) one aims to improve the network’s scalability, security, and sustainability.
Henry Jim, an analyst from Bloomberg Intelligence, commented on this development on Twitter, saying that “the odds for an Ether futures ETF approval this year have gone up considerably.”
He also noted that “the SEC seems to have a soft spot for futures-based crypto products,” referring to the regulator’s recent approval of Bitcoin futures ETFs.
