After a bitcoin futures ETF debuted on the New York Stock Exchange to much fanfare on Tuesday, the capital markets have to be wondering whether the next shoe to drop is an ethereum-based fund.
The second-largest cryptocurrency in terms of market capitalization shot past the $4,000 marker just as bitcoin made a new high a day after the ETF debut. If the latter is indeed the rising tide that lifts all boats, then the second-largest vessel, ethereum, will eventually follow in line.
Right now, options trading activity could be a harbinger of an ether-focused fund. According to a CoinDesk article, Singapore-based trading firm QCP Capital saw a flurry of purchase activity on $15,000 calls for ethereum that expire on March 25, 2022.
QCP Capital noted that “long-term attention seems to be shifting from BTC to ETH with potential ETH ETF release after BTC [ETF in the U.S.], coupled with ETH 2.0 catalyst.” Essentially, traders are betting that the arrival of a bitcoin ETF paves the way for an ethereum ETF that should catapult ether higher — an increase of about four times ether’s current price based on trading activity.
“Options traders are turning their attention to long-term bullish bets on the cryptocurrency ether, as some anticipate that an ether-based exchange-traded fund (ETF) product will likely follow the launch of the first bitcoin futures-based ETF in the U.S.,” the CoinDesk article said. “Data reveal a growing demand for long-dated, out-of-the-money (OTM) call options on ether – bullish bets with strike prices well above the spot market price of the cryptocurrency.”
Further SEC approval on other bitcoin ETFs would also improve the chances of an ethereum fund. Grayscale Investments LLC in tandem with the New York Stock Exchange recently filed to convert its $42.3 billion-dollar bitcoin fund into an ETF.
“Grayscale CEO Michael Sonnenshein has said the SEC will now be more inclined to approve an Ethereum ETF,” a Bitcoinist article said.
There’s Already an Ether ETF
An ethereum ETF in the U.S. would score another win for the cryptocurrency market as it slowly begins to see the capital markets embrace digital assets. However, it won’t be the first ether-based fund, since Canadian ETF provider Evolve currently offers the Ether ETF (ETHR) on the Toronto Stock Exchange.
Per the fund’s description, ETHR offers unhedged exposure to the daily price movements of ether. According to Evolve, the pathway to ethereum ownership via the ETF is outlined by the following process:
- Investors purchase the ETF shares through the Toronto Stock Exchange.
- The dealer creates ETF shares via cash.
- The ETF then purchases ether through a cryptocurrency provider.
- The ether transaction settles, and the currency is stored in a “cold wallet” for maximum safekeeping.
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