Ethereum ETF Approval Expectations Heat Up: Can ETH Replicate Bitcoin's Rally?

Ethereum ETF Approval Expectations Heat Up: Can ETH Replicate BTC's Rally?

With the U.S. Securities and Exchange Commission (SEC) approaching its final deadline for decisions on multiple spot Ethereum ETF applications, market expectations for approval are rapidly intensifying. This sentiment closely mirrors the atmosphere just before the Bitcoin spot ETF approval in early 2024, prompting widespread investor interest: Will ETH experience a similar price surge and ecosystem boom following approval? This article analyzes the likelihood of spot Ethereum ETF approval and its potential impact on ETH price and ecosystem, drawing on recent market news, regulatory developments, and on-chain data.

1. Recent Market News and Regulatory Dynamics

According to multiple media reports, the SEC has recently engaged in intensive discussions with several asset management firms applying for spot Ethereum ETFs, covering key issues such as product structure, custody arrangements, and market manipulation prevention. Although the SEC's regulatory classification of Ethereum has been controversial—its former chairman hinted that ETH could be considered a security—many analysts now note that the SEC's stance on Ethereum has softened since the approval of Bitcoin futures ETFs. Additionally, the Chicago Mercantile Exchange (CME) has launched Ethereum futures contracts, providing a basis for price discovery and risk hedging for spot ETFs.

Notably, the SEC's final decision deadlines for spot Ethereum ETF applications are concentrated in May to June 2024. The market generally believes that if the SEC quickly advances Ethereum ETFs following Bitcoin ETF approval, it would signal a substantive shift in the regulator's attitude toward crypto assets. However, some argue that the SEC may follow the same approval pace as Bitcoin ETFs, approving some applications first before gradually rolling out others.

2. Can ETH Replicate BTC's Rally?

After the spot Bitcoin ETF was approved in January 2024, BTC's price surged from around $40,000 to over $100,000 by the end of the year, a gain of more than 150%. This rally was driven primarily by: massive purchases by traditional financial institutions through ETF channels, significantly improved market liquidity, and investor recognition of the digital gold narrative. So, can Ethereum replicate this path?

From a fundamental perspective, Ethereum and Bitcoin differ significantly. Bitcoin's core narrative is "digital gold," with its store-of-value attribute widely accepted; Ethereum, on the other hand, is a "smart contract platform," with its value largely dependent on the vibrancy of its on-chain application ecosystem. If a spot Ethereum ETF is approved, ETH will gain a direct channel to the traditional financial system, potentially leading to large-scale institutional capital allocation through ETFs, thereby boosting its price. However, ETH's upside may be constrained by the following factors:

• Competition from Staking Yields: After Ethereum's transition to Proof-of-Stake (PoS), holders can earn annual yields of approximately 3%-5% through staking. If ETF products cannot include staking rewards, they may be less attractive to long-term holders.
• Regulatory Uncertainty: The SEC's classification of Ethereum as a security remains unclear. If future regulatory policies tighten, it could affect the continued operation of ETFs.
• Ecosystem Competition: Public blockchains like Solana and Avalanche challenge Ethereum in transaction speed and cost, potentially diverting some applications and users.

Nevertheless, historical experience shows that the mere expectation of an Ethereum ETF following Bitcoin ETF approval has already driven periodic price increases for ETH. According to CoinGecko data, within one month of Bitcoin ETF approval, ETH's price rose by over 30%, demonstrating a strong correlation. If the Ethereum ETF is ultimately approved, ETH could see a similar "expectation fulfillment" rally in the short term, but its long-term trajectory will depend on ecosystem development.

3. Potential Impact on the Ethereum Ecosystem

The approval of a spot Ethereum ETF would not only affect ETH's price but could also reshape the entire Ethereum ecosystem. First, ETFs would introduce a large number of traditional institutional investors to Ethereum, with these funds potentially purchasing ETH on the secondary market, thereby boosting the total value locked (TVL) in on-chain DeFi, NFTs, and other applications. Second, the compliant nature of ETFs would enhance Ethereum's credibility within mainstream finance, attracting more developers to build applications on Ethereum and accelerating ecosystem innovation.

However, ETFs could also introduce centralization risks. A large amount of ETH being custodied by a few exchanges or custodians may undermine the original intent of decentralized governance. Additionally, the subscription and redemption mechanisms of ETFs could exacerbate short-term price volatility for ETH, especially during periods of intense market sentiment shifts.

4. Market Sentiment and Key Milestones

Currently, market optimism regarding Ethereum ETF approval is on the rise. According to prediction markets like Polymarket, the probability of a spot Ethereum ETF being approved before May 2024 has increased from around 30% at the start of the year to over 50%. If the SEC approves applications before the deadline, ETH's price could experience a rapid surge; if rejected, a short-term pullback may occur, but in the long run, Ethereum's fundamentals still support its value.

Investors should closely monitor the following key milestones: the SEC's final decisions on applicants such as VanEck and Ark Invest, public statements from SEC Chairman Gary Gensler, and changes in CME Ethereum futures open interest. These events will directly influence market expectations.

Risk Warning

The above content is for reference only and does not constitute investment advice. The cryptocurrency market is highly volatile, and the outcome of spot Ethereum ETF approval remains uncertain. Investors should fully understand the associated risks and make investment decisions with caution.