• Less than six months have passed since the SEC authorized bitcoin ETFs.

• According to FactSet, net inflows from those funds have already surpassed $12 billion, demonstrating their significant performance for the sector.

• Ether ETFs are anticipated to be smaller than bitcoin ETFs, at least initially.

One of the biggest cryptocurrencies in the world, ether, can now be purchased and held by ETFs thanks to a regulation change that the SEC approved on Thursday.

Less than six months have passed since the Securities and Exchange Commission authorized bitcoin exchange-traded funds (ETFs). According to FactSet, net inflows from those funds have already surpassed $12 billion, demonstrating their significant performance for the sector.

Since it fell on the same day as the SEC’s deadline for determining whether the VanEck Ethereum ETF could move forward, late May had long been considered as a possible decision date for the ether funds.

Many of the firms that support bitcoin exchange-traded funds (ETFs), such as Bitwise, Galaxy Digital, and BlackRock, have also begun establishing an ether fund.

Even though it followed a 20% spike earlier in the week in anticipation of Thursday’s ruling, the price of ether increased by just 2%. Not all funds will start even after the SEC approves a regulation change, so some investors might also be on hold.

The SEC’s order specifically authorizes the listing of eight distinct ether funds based on petitions from different exchanges. In a technical sense, the order doesn’t approve the funds directly or specify when the ETFs will start trading.

Ether ETFs are anticipated to be smaller than bitcoin ETFs, at least initially. With around $11 billion in assets at the moment, the Grayscale Ethereum Trust is far smaller than the company’s Bitcoin fund was before its conversion.

The SEC’s attitude towards cryptocurrencies may be changing following a string of court battles, as seen by the approval of the ether ETFs. The agency’s 2023 lawsuit against Grayscale, which prompted the goods’ approval for Bitcoin, was lost.

Politicians have also questioned the SEC’s efforts to regulate cryptocurrencies. A resolution to remove an SEC staff bulletin regarding digital asset accounting rules was approved by the Senate last week.

With bitcoin, ether is the second-largest cryptocurrency asset and has grown to be considered a reliable alternative, despite having a very different value proposition. An investment in ether is viewed more like an investment in early-stage technology, whereas bitcoin is largely recognized as a long-term store of value. The Ethereum network, which is powered by the ether token, is responsible for a variety of applications, including non-fungible tokens (NFTs), decentralized finance (DeFi) initiatives, and the tokenization of actual assets such as stocks, commodities, real estate, artwork, and more.

According to Richard Kerr, a partner at the legal firm K&L Gates, the applications that were approved on Thursday do not apply to other cryptocurrency initiatives on the Ethereum network.

“The approval of an ether product does not guarantee the approval of a similar product for other digital assets on the Ethereum platform,” stated Kerr.

Ethereum additionally offers staking options, which allow investors to earn interest on their ether holdings by temporarily locking up tokens on the network; however, U.S. ether ETFs may not be able to partake in this scheme. In litigation against Coinbase and Kraken, the SEC has claimed that offerings that provide staking as a service are unregistered securities. This month, Ark, Fidelity, and Grayscale amended their paperwork to take staking out of their plans.

According to Steven Lubka, managing director of Swan Bitcoin and head of Swan Private, another reason why ether ETFs might not be as popular as their bitcoin equivalents is the lack of staking in the ETF products.

“There are some structural differences in the product that just make it less attractive overall, and these numbers are not going to match the inflows into bitcoin ETFs,” Lubka stated.