Here’s What Approvals of Ethereum Futures ETFs Could Mean for ‘Spotcoins’ 

In the wake of the watershed approval of nine ETFs that track ether futures contracts, along with an August court ruling that the SEC was unjust in blocking Grayscale Investments’ application to convert its Grayscale Bitcoin Trust into an ETF, the path forward to getting a so called “spotcoin” has never looked more optimistic to some investors.   

After telling multiple firms to withdraw their applications last May, the Securities and Exchange Commission approved nine exchange-traded funds that hold ether futures on Oct. 2. The firms, including ProShares, Bitwise Asset Management and VanEck, rolled out multiple products.     

Yet last week, the SEC punted a slew of spot bitcoin applications, signaling that approval for investment vehicles based on physically backed bitcoin still has a way to go. While some asset managers have declared the ether futures approval to be a gateway to eventual spot approval, the spot process is its own challenge.   

Matt Hougan, Bitwise’s chief investment officer, said in comments on CNBC that he expects spot bitcoin ETF in 2023, while VanEck CEO Jan Van Eck threw out early 2024 as his bet for the product’s launch.     

Grayscale announced on the day of ether futures approvals that it was beginning the process of converting its Grayscale Ethereum Trust into an ETF.   

“[The ether futures approval] further highlights the untenable situation of just having futures and not having after the DC court ruling,” explained Damien Scott, a digital asset attorney at Scoolidge, Peters, Rusotti & Fox LLP. “There is a direct correlation between the futures and the spot markets, and that's the point that was made in [Grayscale’s] court case.”   

“What is clear is that, like bitcoin, the listing of these ethereum Futures ETFs is ultimately paving the way for a spot ethereum ETF in the US,” said Bradley Duke, chief strategist officer at ETC Group, a provider of crypto exchange-traded products.   

High Hurdles for Spot ETF  

While the approval of ether futures may make a spot greenlight appear more likely than it did months ago, it’s by no means a done deal. The SEC could appeal the Grayscale ruling, require Grayscale to refile, which in both cases would draw out the approval process for the trust’s conversion many more months.  

 “Spot is still its own issue, but [ether futures approvals] certainly raises the hopes for those looking for a spot ETF,” Morningstar ETF analyst Bryan Armour said in an interview.  “The fact that we have a number of Ethereum ETFs trading is a big deal, but it’s still different than spot—it is another higher hurdle to get over.”   

 Ric Edelman, financial advisor and founder of the Digital Assets Council of Financial Professionals, said he is not convinced that the approval of ether futures products is “necessarily good news” about how the agency will handle bitcoin ETF applications.    

“The fact that the SEC has approved the ethereum futures ETFs clearly demonstrates that they are not going to reverse their decision about the bitcoin futures ETFs—that's good news. However, this does not necessarily draw a straight line to approval of the spot bitcoin ETFs,” Edelman. said.  

Contact Lucy Brewster at [email protected].