Ether Spot ETF Approval Would Raise Expectations Solana Could Also Be Classified as a Commodity: Bernstein

Ether spot ETF approval would set a precedent as the first non-bitcoin digital asset to be considered a commodity, raising expectations that solana could follow the same path, the report said.

AccessTimeIconMay 23, 2024 at 11:22 a.m. UTC
Updated May 23, 2024 at 9:37 p.m. UTC
  • Approval of a spot ether ETF could bode well for rival tokens such as solana, the report said.
  • Bernstein said a Trump election win could mean a more crypto-friendly administration.
  • Galaxy Digital said the approval process could drag on for a few more months.

Approval of a spot ether (ETH) exchange-traded fund (ETF) in the U.S. will be seen as significant regulatory relief for the crypto sector and raise expectations for ETH's rival SOL to be categorized as a commodity, broker Bernstein said in a research report on Tuesday.

The report sent to clients days before the SEC's final deadlines on whether to approve some of the ETH ETF applications said the Biden administration might soften its stance on crypto ahead of the November Presidential Elections and a potential Trump victory would be broadly positive.

"Long term, we do believe, should Trump get elected, crypto could see significant legislative and agency support (with a new SEC chair), to usher in long-lasting structural changes in crypto financial integration," analysts Gautam Chhugani and Mahika Sapra wrote.

"More tactically, the Ethereum ETF approval would set the precedent for a first non-Bitcoin blockchain asset to be considered a commodity, raising hopes for Ethereum’s peers (Solana likely) to follow the same path," analysts added.

The classification of cryptocurrencies as either securities or commodities has far-reaching implications. For instance, ETF applications and approval hinge on the classification of tokens as commodities. Meanwhile, categorization as a security means a more stringent regulatory oversight by the SEC.

Ether surged higher earlier in the week after two well-followed Bloomberg ETF analysts upped the odds of the SEC approving spot ether ETFS to 75% from 25% and after reports that the regulator had abruptly asked applicants to update their filings, signaling that an approval was more likely. The SEC has several final deadlines on spot ether ETF applications this week after having delayed its decisions a number of times.

Bernstein notes that bitcoin rallied 75% since the approval of spot ETFs, and it expects similar price action for ether. Ether's free float and supply looks more attractive than bitcoin, as 38% of the cryptocurrency is locked in staking, smart contacts and layer 2 chains, and 66% of ETH supply has not moved in the last twelve months, the report noted.

While the ether spot ETF 19b-4 filings are likely to be approved this week, S-1 filings are not expected to go effective for weeks to months, "resulting in no exchange-tradeable ETH spot vehicles until this summer," wrote Alex Thorn, head of research at Galaxy Digital (GLXY) in a report on Tuesday.

If the SEC approves the spot ETFs, Galaxy speculates that they could launch on exchanges in July or August. Galaxy also expects the regulator to approve all the applications simultaneously to avoid giving any individual issuer a head start.

Edited by Omkar Godbole.


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