Valkyrie said it will not purchase ether (ETH) futures until the SEC's approval is officially effective.
The state of crypto is presented by Tron connecting the world to the power of Cryptocurrency. Good morning and welcome back to first mover. More. Trad five players are filing applications with the SEC for Ether futures based ETF S following the spot. Bitcoin ETF hype. This comes as Val said, it will not purchase Ether futures until the SEC approval is officially effective. Joining us now to discuss is ETF Think Tank research director Cynthia Murphy. Welcome back to the show, Cynthia. Hey Jen. Good morning. Hi Lauren. Good morning morning. All right, let's start with the val. Great news. The firm previously said it started adding Ether futures exposure to its Bitcoin strategy ETF after gaining sec approval, but then it backtracked late last week. What do you think happened here? Yeah, I think what happened is that they actually did not have uh sec approval. So they, they moved a little too quickly uh because everybody was expecting this approval to come and uh they probably got their hands slapped. Uh at least as theory we have going around and they had to backtrack a little bit and wait for an actual rubber stamp for regulators to go ahead and do that. So, and I, I think we're gonna be seeing that this week. We all expect all these Ethereum ETF s to launch today. So I think they just uh they jumped the game a little bit and they had to take a step back and wait for formal approval. Yeah, we have uh you know, something like nine ether futures getting approved by the SEC. What do you think is driving? What drove that, that approach to do it all at once? Particularly that these are ef that focus on futures contracts? Of course, they're holding back on efs that would do anything in the spot market is this sort of a way to placate the, the crypto industry and say, look, we're, we're, we'll let you have all these things out there because we're probably gonna reject it in the, in, in the coming months a spot ETF but you should be more than happy that we got your futures ETF, get off our backs. Do you think that's kind of the thinking the SEC has here or is there some other reason why they, in a way? I think this was an inevitable move. Um because, um, you know, we have a future. There's Bitcoin ETF S already in the market. We've had them for two years. So there really is no good reason why em ETF S would be any different. So the sc I think had no real ground to deny all these applications now, do they impact at all? How the spot race changes? Uh probably not. Uh the, the impact should be the same we've seen with the Bitcoin Futures products, which is, you know, nothing has really happened. There has been no acceleration on the spot chase. So I think this is just the sec doing what it has to do, which is approve these products. They have no real reason to say no. Uh We've had uh the Bitcoin futures products have worked really well. Price discovery works well. Um Access works well, they have really no issue to, to flag these products is any different from that. Uh But you know, is that going to change? What happens now with the Spot race? I think the way we interpret this as is this just one more step in the right direction? Is it the one more step in trying to mainstream access to crypto assets through ETS? Uh but the, the, the race for the spot access that remains unchanged, we continue to wait for, for the SEC to, to soften its stance on that front. So they're curious if you have an opinion here, Sec chair Gary previously refused to say whether Ether is a security or not. Do you think the approval of these ETF s solidifies Ether as more of a commodity or a security? Well, at least from a regulatory perspective, uh it is now uh a commodity just like Bitcoin. Uh it's, it's been termed that way. So it's going to be evaluated in that way. Uh I think, uh, you know, it's the label they chose and it's the same one they chose for Bitcoin. So I think it's, uh, I mean, there's really no reason to expect this to change, uh, for the, for the purpose of ETF S or access. So it's, it's just uh how the regulators chose to, to interpret this type of asset, uh, for a regulatory perspective. So it is just like Bitcoin, it, it's just like Bitcoin. But nonetheless, I mean, do you think that, that the SEC or, or, you know, with, with that kind of 32, vote might say? Ok, you know what, we proved the CTF, because it is dealing with a, um, AC FTC regulated instruments, the, the E Ether futures on the CME. But as far as we're concerned, spot is the security, what, what happens after it or do you think they'll make, do you think they'll make that nuance or they'll just say, you know, what de facto, it's a future? I, I, it's, it's a, uh, commodities and we'll, we'll just, we'll just let it go. Yeah, I, I don't think that they will change. I think it will remain a commodity. And what that means really is just who has regulatory oversight over this asset. So, is it an sec, regulatory oversight? Uh, not really should be actually the CFTC, the commodity futures in this case, right? Uh Trade commission. So it's uh from a regulatory perspective, it really, it's more of a jurisdiction battle here on who regulates the stuff, which has been the big hurdle for spot approval. Like when you look at a coin base, for example, um because it trades uh assets are considered commodities and assets that are considered securities. Uh no single government agency has full of oversight of that exchange uh because it's, it's toting both sides uh of the, of the market. So that is kind of the, the challenge here. And, and so step one is defining these things either as a, either as a commodity or a security. So I, I can't expect it to change. I think commodity it is. Um even when we talk about spot exposure and, and I think that's part of the reason why all the spot uh filings are filed under, under grantor trust uh formats the 1933 act type of structure, which is the one you use for a physical commodity exposure. So I think it's, it's not going to change. I mean, but this whole space is completely new territory for us. Uh So I think anything goes, but I can't imagine regulators would change their stance on these things given, given the amount of ETF S that are approved for today. Uh Does uh what happens if it's a dud? I I and I, you know, we, we, we don't know yet this is the, the start of the day, anything can happen. But looking ahead if there isn't that much interest in the in and we saw a lot of, a lot of the institution. Uh when we look at the CME futures commitment of traders, a huge chunk of that is uh the ETF S taking on positions. What if this just doesn't catch fire? What happens then to the spot ETF S that uh that, that are being filed? I mean, do, do people look at it and give it a second thought? You know, it's a great question. I mean, the only parallel we have here is what happened to the Bitcoin Futures ETF S that launched two years ago. So when you, if you remember the first one to come to market, the pro shares fund hit a billion dollars in two days. It's the fastest most successful ETF launch ever in the history of ETF S. Uh The previous record was held by physical gold ETF back in 2004 when it hit a billion, billion dollars in three days. And uh Bitcoin Futures beat that. Now we're two years later here, we are looking at Ethereum features which in some ways given all the conversations we've been having about the spot exposure, we're all excited about that direct access. There's a big chance actually that these don't really go anywhere because people are excited for spot at this point. Futures almost feels like yesterday's news on some way. Uh, but it's all we all we have. So I think it'd be really interesting to see if the demand is there. I mean, there's also the concern about, you know, a lot of times crypto is seen as risky asset is the appetite for risk assets right now. Strong or not people worried about the economy that slow down adoption here. But, uh, I, I think there is a possibility that uh you know, these ETF S launched to very little fanfare because now we're excited for, for direct taxes and we, what we've learned in the ETS space is this, if you, you can have direct access to something, why do you want futures? Uh We, you see that in gold, you know, gold, uh physical gold versus miners or, or futures, I mean, people prefer direct. So now that we are on the countdown to that direct taxes, it could be that futures is a little bit too late, but you know, it's all we have. So it would really would be a surprise, we don't know what's coming, but it would be exciting to watch. I got to ask you Cynthia with nine firms expected to launch their ETF S today. How do you think they're reacting to the flurry of approvals when we talk about ETF S usually part of the business model is a competitive advantage, right? If you're first to market, you have that competitive advantage with your ETF now nine are going to market. Do you think that that's a challenge for all of these nine firms that are expected to launch today? It, this is the first time we've ever seen this. It's always, you know, the ETF market is really, really kind of to first movers. Uh, we see that all the time. I mean, in the Bitcoin futures space, we've seen that, uh, the first one that came to market has 90% of the assets in that segment and everybody else is a very, very, very distant second. But in this case, we're gonna have nine first movers. So it's almost like an experiment. We are going to see how are they going to differentiate uh in a space that there's no differentiation. I mean, you're gonna have cost advantage so that the, the range is in terms of fees for these ETF S is from 66 basis points to 1%. So maybe that will be uh that the lower cost is going to win. Uh We saw on Friday VA announced that they're going to be donating 10% of the profits of the A TF to the actual uh Ethereum developer ecosystem. So, you know, signaling a little bit of virtual signaling there and look at us, we're gonna be investing in this space because we really believe in it. So I think it would be really interesting to see what these firms come up with as a differentiator because we have never had a nine first movers. This is the first time and uh we can't wait to see what they come up with. All right, Cynthia, thanks so much for joining the show. It was a pleasure speaking to you again and for unpacking the flurry of E futures efs we're going to see on the market today. Thanks for having me. That was ETF Think Tank research director Cynthia Murphy.