Bullish investment strategies before spot ETH ETF approval

Bullish investment strategies before spot ETH ETF approval

There are several reasons to be optimistic about the approval of spot Ether exchange-traded funds (ETFs) in the near future. First, the United States Securities and Exchange Commission has already shown a more favorable attitude toward cryptocurrencies in general, as evidenced by its approval of 11 spot Bitcoin ETFs in January 2024. This was a historic milestone for the crypto industry, as it marked the first time the SEC allowed investors to access the largest cryptocurrency through a regulated and mainstream investment vehicle.

Second, Ether has a strong case for being classified as a commodity rather than a security by the SEC. This is a crucial distinction, as commodities are subject to less stringent regulations than securities and are, therefore, more likely to be approved for ETFs.

Ether is widely regarded as a commodity by many experts and authorities, including the U.SCommodity Futures Trading Commission, the Financial Conduct Authority in the United Kingdom, and Bloomberg’s ETF analysts. The Ethereum blockchain is also the backbone of the decentralized finance and nonfungible token sectors, which are booming with innovation and adoption, and demonstrate the utility and value of the network.

Third, there is a strong demand and interest for spot ETH ETFs from both retail and institutional investors. According to a recent survey by Bitwise Asset Management, 98% of financial advisers who currently have an allocation to crypto in clients’ accounts intend to maintain or increase their exposure in 2024, which also favors ETH.

Chris Kuiper, director of research at Fidelity, recently shared his insights on why Ether could be a more appealing investment option for institutional investors than Bitcoin. He highlighted that comprehending Bitcoin as an investment requires delving into intricate topics such as politics, philosophy, game theory and economics. In contrast, Ether provides a more straightforward perspective, emphasizing basic metrics and cash flow data. Kuiper believes presenting these metrics to institutional investors would make ETH appear more like a conventional financial instrument, making it easier for them to relate to the asset.

In addition, there are several applications for spot ETH ETFs pending with the SEC, such as the Fidelity Ethereum Fund, the WisdomTree Ethereum Trust and BlackRock’s iShares Ethereum Trust. These are some of the world’s most reputable and influential asset managers, and their involvement could sway the SEC’s decision in favor of spot ETH ETFs.

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Given the positive outlook for spot ETH ETFs, how should investors prepare for the potential approval? There is no definitive answer, as different investors have different risk appetites, time horizons and market outlooks. However, here are some possible strategies to consider, depending on whether one is bullish or bearish on Ether.

For investors who are bullish and optimistic about the approval of spot ETH ETFs, there are several ways to benefit from the anticipation and speculation of an approval, such as:

  • Buying spot ETH: The simplest, most direct way to gain exposure to the price appreciation of Ether is to buy and hold the spot ETH, either through a crypto exchange or a wallet. However, this also involves the highest risk and cost, as the investor has to deal with the volatility, security, and custody issues of holding and storing Ether directly.
  • Buying futures ETH ETFs: Another way to gain exposure to the price appreciation of Ether is to buy and hold futures-based ETH ETFs, such as the VanEck Ethereum Strategy ETF or the ProShares Ether Strategy ETF. These ETFs track the price of Ether by holding futures contracts that promise to deliver ETH at a future date and price. However, this also involves some risk and cost, as the investor has to deal with the contango, rollover, and tracking error issues of holding and trading futures contracts.
  • Buying call options on ETH or ETH ETFs: A more sophisticated, leveraged way to gain exposure to the price appreciation of Ether is to buy call options on ETH or ETH ETFs, such as CME ETH options. These options give the investor the right, but not the obligation, to buy ETH or ETH ETFs at a predetermined price and date. However, this also involves the most risk and cost, as the investor has to pay a premium for the options, and the options could expire worthless if the price of Ether or the ETH ETF does not exceed the strike price by the expiration date.
  • Arbitraging between different ETH products: A more complex, arbitrage-based way to gain exposure to the price appreciation of Ether is to exploit the price differences between different ETH products, such as spot ETH, futures-based ETH ETFs, spot ETH ETFs (if available in other jurisdictions), and ETH derivatives. However, this also involves the most skill and capital, as the investor has to identify and execute the arbitrage opportunities, and hedge against the market and operational risks.
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Ethereum is one of the most innovative, influential platforms in the crypto space, and the approval of spot ETH ETFs could be a game-changer for the industry. However, an approval is not guaranteed, and the timing is uncertain. Therefore, investors should be prepared for various scenarios and adopt the appropriate strategies according to their risk appetite, time horizon and market outlook. To aid in their strategies, investors may consider using a powerful trading dashboard such as Cointelegraph Markets Pro.

Whether one is bullish or bearish on Ether, there are multiple ways to invest in the cryptocurrency before a potential spot ETH ETF approval, and potentially profit from the anticipation and speculation of such an approval. But remember, this is not financial advice.

 

Source: https://cointelegraph.com/news/bullish-investment-strategies-before-spot-eth-etf-approval

FAQ

What factors make the approval of spot Ether exchange-traded funds (ETFs) more likely in the near future?

According to Anndy Lian, the approval of spot Ether ETFs is increasingly probable due to the SEC's favorable stance on cryptocurrencies, demonstrated by the approval of 11 spot Bitcoin ETFs in January 2024. Additionally, Ether's potential classification as a commodity, rather than a security, aligns with less stringent regulations, making it more suitable for ETF approval. The strong demand from both retail and institutional investors further supports this optimistic outlook.

How can investors prepare for the potential approval of spot Ether ETFs?

In the article, Anndy Lian mentioned that investors with varying risk appetites, time horizons, and market outlooks have different strategies to consider. For those bullish on Ether, direct purchase of spot ETH, investment in futures-based ETH ETFs, buying call options, and arbitraging between different ETH products are potential approaches. Each strategy comes with its own set of risks and costs, necessitating careful consideration based on individual preferences and market expectations.

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What makes Ethereum an appealing investment option for institutional investors, according to Chris Kuiper of Fidelity?

Chris Kuiper highlights Ethereum's appeal to institutional investors, emphasizing its straightforward perspective compared to Bitcoin. While understanding Bitcoin requires delving into intricate topics such as politics, philosophy, game theory, and economics, Ethereum provides a more conventional financial instrument view. Kuiper suggests that presenting Ethereum's basic metrics and cash flow data makes it more relatable to institutional investors, potentially positioning it as a more attractive investment option than Bitcoin.

Anndy Lian is an early blockchain adopter and experienced serial entrepreneur who is known for his work in the government sector. He is a best selling book author- “NFT: From Zero to Hero” and “Blockchain Revolution 2030”.

Currently, he is appointed as the Chief Digital Advisor at Mongolia Productivity Organization, championing national digitization. Prior to his current appointments, he was the Chairman of BigONE Exchange, a global top 30 ranked crypto spot exchange and was also the Advisory Board Member for Hyundai DAC, the blockchain arm of South Korea’s largest car manufacturer Hyundai Motor Group. Lian played a pivotal role as the Blockchain Advisor for Asian Productivity Organisation (APO), an intergovernmental organization committed to improving productivity in the Asia-Pacific region.

An avid supporter of incubating start-ups, Anndy has also been a private investor for the past eight years. With a growth investment mindset, Anndy strategically demonstrates this in the companies he chooses to be involved with. He believes that what he is doing through blockchain technology currently will revolutionise and redefine traditional businesses. He also believes that the blockchain industry has to be “redecentralised”.

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