Another day, another milestone in the crypto world…
U.S regulators have approved applications for spot Ethereum (ETH-USD) exchange-traded funds (ETFs). This is the second crypto available to be traded via ETFs for the average investor. Bitcoin (BTC-USD) ETFs began trading in January.
These ETFs will give investors access to Ethereum in traditional brokerage or retirement accounts with the click of a button. It was widely assumed that the approval was inevitable. However, it could still spark a buying frenzy similar to what we saw following the Bitcoin ETF approval in January.
Since then, Bitcoin ETFs have net inflows of $17 billion.
Ethereum is up since the news broke, and it’s one of the top performers within the top 100 coins. But the crypto’s 85% gain over the past year is still lagging Bitcoin’s 128% increase.
Bitcoin remains the most popular crypto available today. Its market valuation is about three times greater than Ethereum’s. So I don’t expect inflows to be as impressive as the Bitcoin ETFs’. However, a portion of the investing population has been waiting for this approval. And I’d bet they won’t hesitate to dive in.
Another potential positive for Ethereum is that it’s very different from Bitcoin – even though it’s the second-largest coin in the market. Whereas Bitcoin is a store of value due to its limited supply of 21 million coins, Ethereum is the “guts” of the crypto world. It provides more utility and should be viewed as the software giant of the asset class.
Ethereum is a smart contract platform that runs on the blockchain. Its use cases could be considered endless. And it has the ability to become the platform that new technologies are built on.
In other words, Bitcoin and Ethereum complement each other as investments. In fact, owning both in a crypto portfolio helps diversify it.
Back when I owned my investment advisory, many clients would ask about gaining exposure to the top two cryptos. At the time, their only option was to use a crypto exchange such as Coinbase.
But the fact that these coins can now be purchased via a normal investment account is a game-changer. And I anticipate Ethereum will get a longer-term boost from new money as a result.
Don’t expect a big rally right off the bat, though. As I mentioned before, the approval was expected. But it will still take time for big investment advisors to get their clients into these new funds.
At the end of the day, this approval is a huge positive for the long-term viability of cryptos. I expect it will open the door for even more spot crypto ETFs in the future. My opinion is that Solana (SOL-USD) – currently the fifth-largest coin – will be the next ETF approval in the coming year.
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