The anticipation surrounding the launch of spot Ethereum exchange-traded funds (ETFs) is experiencing a shift. Initially, the crypto community hoped these ETFs would begin trading as early as this week. However, that optimism is waning as industry experts now express doubts about the Securities and Exchange Commission (SEC) approving the current batch of applications soon.

Eric Balchunas, an analyst with Bloomberg Intelligence, noted on X (formerly Twitter) that expectations must be adjusted. He previously predicted that the SEC would approve the applications before July 4, but new information suggests otherwise. The SEC has requested prospective issuers to amend their applications, pushing the likely approval date to the week of July 8.

Unfort think we gonna have to push back our over/under till after holiday. Sounds like SEC took extra time to get back to ppl this wk (altho again very light tweaks) and from what I hear next wk is dead bc holiday = July 8th the process resumes and soon after that they’ll launch… https://t.co/0ZQR7yiBLt

— Eric Balchunas (@EricBalchunas) June 28, 2024

Balchunas mentioned that little movement from regulators is expected this week due to the upcoming Independence Day holiday. This delay is a minor setback for an industry eager to see spot Ethereum ETFs invigorate the stagnant market, akin to the impact spot Bitcoin ETFs had at the start of the year.

Matt Hougan from Bitwise believes that Ethereum exchange-traded products will attract $15 billion in net flows within the first 18 months of their launch. However, current odds on the crypto betting site Polymarket have dropped significantly. Punters now place the likelihood of a spot Ethereum ETF starting to trade by July 4 at just 4%, down from 77% the previous week.

Amendments and further filings on Ethereum

On June 29, an insider told The Block that the SEC asked applicants to address certain comments and resubmit their applications by July 8. This back-and-forth process between applicants and the SEC is expected to continue, further delaying the final approval.

Despite the setback, Ethereum saw a 3% surge over the weekend, trading at $3,450. Yet, this positive momentum did not last, as the price fell back again. The hope remains that mid-July will see the launch of a spot Ethereum ETF. However, this optimism has not significantly affected Ethereum’s price. Ethereum’s price has dipped 17% from its 2024 peak of just over $4,000 and 31% from its November 2021 all-time high.

Asset managers remain hopeful. The SEC has given ETF applicants until July 8 to submit updated paperwork and amended S-1 forms. Bloomberg reports that additional rounds of filings might occur after July 8, indicating that the process is still in flux.

Industry optimism and market impact

Steve Kurz, head of asset management at Galaxy Digital, told Bloomberg that an Ether ETF could be approved within the next couple of weeks. He highlighted that the SEC’s engagement and the process of addressing minor questions from the regulator are positive signs. Major asset managers such as BlackRock, Fidelity, Ark 21Shares, and Invesco have pending filings. However, many issuers have yet to disclose their fund fees. This step is necessary before trading can commence.

There is still uncertainty about whether Ethereum ETFs will generate demand similar to spot Bitcoin ETFs. Bitcoin ETFs have accumulated $52 billion in assets since their January launch. Analysts estimate that Ethereum ETF flows could be around 10% to 15% of Bitcoin ETF flows, with ETH prices potentially falling by up to 30% following their launch.

However, research firm K33 Research expects Ethereum to outperform Bitcoin in July. Senior analyst Vetle Lunde noted that ETFs are a strong catalyst for relative ETH strength as summer progresses and flows accumulate, viewing current ETH/BTC prices as a bargain for patient traders.

Bitcoin’s influence and prospects

Bitcoin faces potential selling pressure from the upcoming distribution of nearly $9 billion in BTC from the defunct Mt. Gox exchange. Despite this, K33 Research predicts Ethereum will benefit from ETF inflows. These inflows could account for up to 1% of Ethereum’s total circulating supply.

The SEC’s unexpected approval of rule changes (19b-4 forms) in May led to a brief rally in Ethereum prices. However, the rally was short-lived as the SEC has yet to complete the two-step ETF approval process, which includes S-1 forms.

Nate Geraci, president of The ETF Store, noted that the final approval of S-1 forms is expected to occur by July 12, potentially leading to the launch of Ethereum ETFs in the week of July 15. Industry analysts remain cautiously optimistic, predicting that the first U.S. ETFs directly investing in Ethereum could be approved by mid-July despite the delays and additional filing rounds.

Overall, the crypto industry remains hopeful that the launch of spot Ethereum ETFs will bring significant investment and market activity. This expectation is similar to the impact seen with Bitcoin ETFs. The upcoming weeks will determine the exact timeline. They will also reveal the eventual market reaction.