• Major financial institutions are turning to Ethereum futures ETFs.
• ETF can potentially unleash a massive $30 trillion in capital if the SEC grants its approval. 

Following the spot Bitcoin ETF applications in mid-June 2023, major financial institutions are shifting their focus toward Ethereum futures ETFs. This development has sparked great enthusiasm within the crypto community as these companies seek to expand their product range beyond Bitcoin. 

Notably, six prominent financial firms, namely Volatility Shares, Bitwise, Roundhill, VanEck, Proshares, and Grayscale have recently submitted applications for Ethereum futures ETFs. Eric Balchunas, a senior ETF analyst at Bloomberg, reported these applications on August 1st.

Volatility Shares Introduces Ether Strategy ETF

Volatility Shares, a well-known company recognized for introducing the first leveraged Bitcoin futures ETF (BITX), has submitted a new application named the Ether Strategy ETF. In their proposal to the SEC on July 28, Volatility Shares disclosed that this ETF would invest in cash-settled Ether Futures contracts, which are traded on the Chicago Mercantile Exchange (CME), instead of directly investing in Ether.

This move by Volatility Shares follows the recent successful launch of their 2x Bitcoin Strategy ETF, which tracks twice the daily excess return of the S&P CME Bitcoin Futures Daily Roll Index. Despite some other applicants for Ether ETFs facing the need to withdraw their applications, the accomplishment of the 2x Bitcoin Futures ETF has instilled confidence in Volatility Shares to pursue an Ethereum futures ETF.

These investment instruments would expose investors to futures contracts of the second-largest asset in the market. Unlike spot ETFs, which have not received approval as they track the actual price of Bitcoin, these vehicles are different. The United States Securities and Exchange Commission (SEC) has contended that the market lacks adequate investor protection and is susceptible to market manipulation, making it ineligible for approving a spot ETF.

Withdrawals and SEC Response

Grayscale and Bitwise had previously withdrawn their filings following statements from the SEC. In response to the SEC’s concerns, Grayscale amended its filing to eliminate any references to an Ether futures ETF. Additionally, the SEC had asked Grayscale to retract its application for a Filecoin Trust, citing potential considerations of being categorized as a security.

Similarly, Bitwise completely withdrew its application for an Ethereum futures ETF. However, the company has now re-entered the competition and is committed to being an early participant in this emerging sector, just like other firms.

Apart from Ethereum Futures ETFs, BlackRock’s Bitcoin ETF is one of the most significant developments in this investment arena. The largest asset manager globally is proposing an optimal portfolio allocation with a substantial 84.9% invested in Bitcoin.

A Bloomberg analyst has suggested that this ETF can potentially unleash a massive $30 trillion in capital if the SEC grants its approval. The involvement of such a reputable and established company in filing for an ETF indicates that approval might not be too far off.

The Prospective Outlook of Ethereum Futures ETFs

As major financial institutions eagerly submit applications for Ethereum futures ETFs, the cryptocurrency market eagerly awaits the SEC’s decision on these filings. The success of Bitcoin ETFs earlier this year has sparked enthusiasm for increased institutional involvement in the cryptocurrency sector.

If these ETFs receive approval, it could widen the investor base and allow more people to access the world’s second-largest cryptocurrency. By investing in cash-settled Ether Futures contracts traded on CME, these ETFs aim to provide a regulated and convenient method to track Ethereum’s price movements without directly owning the digital asset.

However, caution is advised among market participants due to mixed sentiment observed in the options data. While some investors remain optimistic about Ethereum’s prospects, others appear to be hedging their positions with bearish outlooks.

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