This week, the US Securities and Exchange Commission (SEC) left the cryptocurrency community abuzz as it postponed its decision as to whether to greenlight options trading on BlackRock’s spot Ethereum ETF (ETHA). Similar proposals from the other Ethereum-based funds from other companies were put on hold likewise.
Still, despite this negative development, the second largest cryptocurrency by market cap did not see its price fall deep and put up just a marginal decline instead. Besides, it keeps surpassing Bitcoin by percentage gains.
The SEC Puts ETH Options Decision on Hold
BlackRock filed for its Ethereum-based ETF options earlier this year – in early August. The decision to delay the outcome came after the typical regulatory review process undertaken by the SEC.
The regulator is always held responsible for the potential risks when it comes to new assets entering the financial markets due to the potential risks for investors (price volatility and market manipulation). The SEC initiates a thorough assessment of all the factors around the proposed new assets before it can either give approval or rejection.
If the regulatory agency approves the ETH options, it would allow investors to gain extra tools to hedge against changes in Ethereum price or can give them a chance to speculate on future ETH movements. Therefore, this delay of the final decision does not seem unusual for the SEC, particularly in light of the recent volatility in the cryptocurrency markets and regulatory scrutiny.
BlackRock Gets Bitcoin Options Approved
Similarly to the other fund managing companies, which have applied for Ethereum-based options (such as Fidelity, Bitwise, Grayscale, etc), BlackRock first submitted a proposal for options tracking the Bitcoin price after it received approval for spot Bitcoin and Ethereum exchange-traded funds (ETFs). Last week, the SEC approved BlackRock to begin trading its Bitcoin options, which caused BTC to make an additional price rise following the interest rate cut announced by the Fed Reserve last week.
That rate cut comprised 50 basis points rather than 25 which many were inclined to expect. After the Fed, the People’s Bank of China (PBOC) also announced that it would follow suit to reduce the interest rates in China. Many experts in financial markets then began tweeting that these rate cuts would allow a lot of cheap capital to enter the markets and this would likely push the prices of certain assets, including Bitcoin, high up.
The initial boom came to the market in January this year, when the SEC approved spot Bitcoin ETFs, offered by BlackRock, Fidelity, Grayscale, VanEck, and several other fund managing companies. Back then, these ETFs began frantically purchasing all Bitcoin within their reach, since they need actual BTC as collateral for their ETF shares which are sold to investors. Before the Bitcoin halving occurred in mid-April, the funds were buying roughly 10,000 BTC per day cumulatively. That was much more than miners were producing daily.
The launch of the spot ETFs and then Bitcoin options from BlackRock that followed largely increased the institutional adoption of BTC and Ethereum (after the spot ETF funds got the green light) and led to the expansion of their presence in mainstream financial markets.
Over the past two days, BlackRock’s IBIT ETF acquired an additional 4,460 Bitcoin worth $289 million. Now, the fund holds 362,192.679 Bitcoin in total, which is equal to $22.9 billion.
Ethereum ETF Market Sees Massive Outflows but SEC Decision Is Yet to Come
While the SEC postponed its verdict on the Ethereum-based options, the market of ETH exchange-traded funds faced the biggest net outflows since July. The Grayscale Ethereum ETF lost 30,251 ETH (worth $79.47 million). Over the last seven days, the fund faced a cumulative withdrawal of 44,889 ETH, which is $119,298,353.
The Invesco Galaxy Ethereum ETF lost 116 ETH ($308,285) with the total weekly net outflows of 110 ETH ($292,339).
Still, BlackRock’s ETHA got positive net inflow of 22,420 ETH (the equivalent of $59,584,064). The weekly inflows for it have comprised 22,662 ETH so far. That is $60,227,211 at the current ETH/USD exchange rate.
Still, over the past week, Ethereum has gained 13%, while Bitcoin added only approximately 6%, lagging behind by approximately 50%. The ETH/BTC pair remains in the upward trend and has increased by 33% in the past week.
Ethereum is currently trading at $2,656, while Bitcoin is changing hands at $65,350. Since the SEC has not yet approved the ETH options and postponed the decision until November 10, the approval is still likely to follow. This gives both retail and institutional investors hopes to see the ETH price going higher up and as if preparing for this, they are actively buying Ethereum now, according to various on-chain data providers.
