Ethereum ETF Approval Shakes Up Crypto Markets as SEC Greenlights Eight Spot Funds

The U.S. Securities and Exchange Commission delivered a seismic shock to the cryptocurrency world on May 23, 2024, when it unexpectedly approved all eight spot Ethereum ETF applications, clearing the way for ether-based exchange-traded funds to trade on national securities exchanges. The decision, which reverberated across global markets through May 28, represented one of the most dramatic regulatory reversals in crypto history and signaled a new era of mainstream acceptance for digital assets beyond Bitcoin.

TL;DR

• The SEC approved all eight spot Ethereum ETF 19b-4 applications on May 23, 2024
• Ethereum surged over 22% in 24 hours following approval rumors, trading around $3,840 by May 28
• Bitcoin held strong near $68,296 as broader crypto markets rallied on the news
• The approval came as a surprise after months of signals that the SEC would classify Ethereum as a security
• London Stock Exchange simultaneously launched Bitcoin and Ethereum ETNs on May 28

A Surprise Nobody Saw Coming

For months leading up to the decision, the outlook for a spot Ethereum ETF appeared bleak. SEC Chair Gary Gensler had made repeated overtures suggesting that Ethereum — unlike Bitcoin, which regulators have long treated as a commodity — could be classified as an unregistered security. Such a classification would have effectively killed any chance of an ETF approval, since funds cannot track assets deemed unregistered securities under U.S. law.

Every prospective issuer the Fortune team spoke with was convinced rejection was inevitable. Jan Van Eck, the head of the eponymous investment firm, told reporters in April that the lack of engagement from the SEC meant they were likely to halt progress. The question dominating industry discussions was not when approval would come, but who would fund the inevitable lawsuit challenging the rejection — just as Grayscale had done for Bitcoin.

Then, virtually overnight, everything changed. The SEC abruptly began engaging with both issuers and exchanges on critical regulatory forms just days before the decision deadline. On May 23, the agency approved all eight applications, catching nearly the entire market off guard.

The Political Catalyst

Multiple analysts and industry observers have linked the SEC’s sudden reversal to mounting political pressure from Capitol Hill. Just days before the approval, the U.S. House of Representatives passed the Financial Innovation and Technology for the 21st Century Act (FIT21) with significant bipartisan support — a sweeping regulatory framework that would establish clear rules for the cryptocurrency industry.

The combination of congressional action and the crypto industry’s growing political clout appears to have shifted the calculus at the SEC. The approval was widely seen as an acknowledgment that the political winds had changed, making an aggressive anti-crypto stance increasingly untenable.

Market Reaction and Price Action

The market response was swift and dramatic. Ethereum’s price skyrocketed over 22% in a single 24-hour period as rumors of the impending approval circulated, reaching highs above $3,900 before settling around $3,840 by May 28. The rally added billions to Ethereum’s market capitalization, which stood at approximately $461 billion according to CoinMarketCap data.

Bitcoin also benefited from the renewed optimism, having reclaimed the $71,000 threshold during the week before pulling back slightly to trade around $68,296 on May 28. The broader crypto market saw increased trading volumes across exchanges, with Bitcoin’s 24-hour volume alone reaching $32.7 billion.

Spot Bitcoin ETFs also continued their impressive run, recording $558.8 million in total inflows for the week of May 22 through May 28. The success of the initial class of 11 Bitcoin ETFs — led by BlackRock’s IBIT and Fidelity’s FBTC — has been among the most successful ETF launches in financial history, providing a compelling template for what Ethereum products might achieve.

London Stock Exchange Joins the Party

The Ethereum ETF approval coincided with another milestone for institutional crypto adoption across the Atlantic. On May 28, the London Stock Exchange officially launched trading in Bitcoin and Ethereum exchange-traded notes (ETNs), marking the first time crypto-backed products traded on the LSE.

The LSE ETNs, which are physically backed by actual Bitcoin and Ethereum holdings, are available exclusively to professional investors following approval from the UK’s Financial Conduct Authority in March. Two issuers debuted products on the inaugural trading day, with additional firms like ETC Group and CoinShares having filed to list vehicles as well.

What Comes Next

While the 19b-4 approvals represent a critical milestone, there are still regulatory steps before the Ethereum ETFs can begin trading. Issuers need to have their S-1 registration statements declared effective by the SEC before shares can be offered to the public. Industry observers expect trading to begin in the coming weeks.

The approval caps off a remarkable year for the cryptocurrency industry, which has seen a dramatic rehabilitation from the aftermath of the FTX collapse and Sam Bankerman-Fried’s criminal trial to a period of surging prices and unprecedented institutional adoption. The Ethereum ETF approval, coming just months after the Bitcoin ETF launches in January, has cemented crypto’s status as a bona fide asset class within traditional finance.

Why This Matters

The SEC’s approval of spot Ethereum ETFs represents far more than just another financial product launch. It is a de facto acknowledgment by the world’s most powerful securities regulator that Ethereum is not a security — a question that has hung over the second-largest cryptocurrency for years. This decision removes a massive cloud of regulatory uncertainty and opens the floodgates for trillions of dollars in institutional capital to gain exposure to Ethereum through familiar, regulated investment vehicles. Combined with the London Stock Exchange’s ETN launch, May 28, 2024, may well be remembered as the day Ethereum completed its journey from experimental technology to mainstream financial asset.

Disclaimer: This article is for informational purposes only and does not constitute financial advice. Cryptocurrency investments carry significant risk. Always do your own research before making investment decisions.