Why Bitcoin's Surge Could Be A Boon, Trap, For New Ether ETFS

Forbes

The crypto industry has long resisted having its tokens classified as securities. However, the success of bitcoin’s spot ETFs, could prompt issuers to break ranks depending on the SEC’s next move.  Bitcoin is trading above $60,000, up more than 167% in the last 12 months and more than $7 billion has poured into the new bitcoin ETFs. The market is buzzing with anticipation for an ETF backed by bitcoin’s little brother ether, the native token associated with the Ethereum blockchain and used to create such things as NFTs. Ether has a market cap of more than $400 billion, second only to Bitcoin, whose market cap exceeds $1.2 trillion. In May, the SEC will likely pass final judgment on nine spot ether ETF applications. But unlike bitcoin’s decision day in early January, which seemed to be a fait accompli, ether’s outlook is far less certain.  Read the full story on Forbes: https://www.forbes.com/sites/stevenehrlich/2024/03/01/why-bitcoins-surge-could-be-a-boon-or-trap-for-new-ether-etfs/?sh=1e9ab58d72f8  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00 Here's your Forbes Daily Briefing for Monday, March 4th.

00:04 Today on Forbes, Why Bitcoin Surge Could Be a Boon or Trap for New Ether ETFs

00:13 Spring has come early to crypto land.

00:16 Bitcoin is trading above $60,000, up more than 167% in the last 12 months, and more

00:23 than $7 billion has poured into the new Bitcoin ETFs.

00:27 ETFs are exchange-traded funds.

00:31 The market is buzzing with anticipation for an ETF backed by Bitcoin's little brother,

00:36 Ether, the native token associated with the Ethereum blockchain and used to create such

00:41 things as NFTs.

00:43 Ether has a market cap of more than $400 billion, second only to Bitcoin, whose market cap exceeds

00:49 $1.2 trillion.

00:52 In May, the U.S. Securities and Exchange Commission, or SEC, will likely pass final judgment on

00:58 nine spot Ether ETF applications.

01:02 But unlike Bitcoin's decision day in early January, which seemed to be a fait accompli,

01:07 Ether's outlook is far less certain.

01:10 The most immediate concern is whether the SEC believes that Ether is a security, which

01:15 means that it would be subject to registration and regulatory oversight by the SEC under

01:19 the Investment Company Act of 1940.

01:23 Most ETFs, like the QQQ or the SPDR S&P 500 Trust, fall under the so-called 40 Act precisely

01:31 because they are bundles of stocks or registered securities.

01:35 Despite the fact that cryptocurrencies seem to trade and behave much like any number of

01:39 stocks in the market, the digital asset community believes that the thousands of different cryptocurrencies

01:44 behind the $1.8 trillion industry are not securities.

01:49 In fact, they bristle at the thought, calling it anathema to the decentralized ethos that

01:54 launched Bitcoin 15 years ago.

01:56 To some extent, these beliefs were vindicated when the SEC greenlit spot Bitcoin ETFs in

02:02 January after a 10-plus year wait under the 1933 Securities Exchange Act, which recognized

02:09 the underlying Bitcoin in these funds as commodities.

02:13 So far, the SEC has avoided addressing the issue of whether Ether is a security, although

02:18 it has alleged, in its June 2023 case against Coinbase, that numerous tokens, including

02:24 those associated with blockchains Cardano and Solana, which are essentially clones of

02:29 Ethereum, are in fact securities.

02:32 SEC Chairman Gary Gensler has been conspicuously mum about Ether's status.

02:38 If the SEC decides that Ether is a security, it will insist on ETF issuers treating it

02:43 as such in their applications for approval.

02:47 While this might seem like just a bunch of legal paperwork, doing so would be an affront

02:50 to crypto industry insiders and idealists, and would throw into question the status of

02:55 thousands of cryptocurrencies.

02:57 However, given the potential billions at stake for early movers in the new booming market

03:01 for crypto ETFs, those that can gain market share as rapidly as BlackRock, Invesco, and

03:06 Fidelity have with their Bitcoin ETFs could benefit from such an SEC ruling.

03:12 When it comes to asset gathering and profits, the so-called "crypto community ideals" aren't

03:17 likely to carry much weight.

03:20 After Bitcoin, Ethereum, which was created by Vitalik Buterin and others in 2015, is

03:25 the second most important blockchain in the world.

03:28 It is distinguished from Bitcoin in that it allows developers the freedom to create myriad

03:32 applications, often called "smart contracts," running over it.

03:37 Its success is critical to a giant ecosystem of companies ranging from Nike and Circle

03:42 to Uniswap and Blur, involved in businesses ranging from payments to decentralized finance

03:47 and gaming to NFT applications.

03:51 The price of Ether, known widely as ETH, has doubled in the past 12 months.

03:57 Ethereum's origin story is significantly different from Bitcoin's, and that is of keen interest

04:02 to the lawyers at the Securities and Exchange Commission.

04:05 Ethereum conducted a crowd sale in the form of an initial coin offering in mid-2014 and

04:10 reserved a portion of the 72 million Ether created, at launch, for the founding team

04:14 led by Buterin.

04:16 In many ways, ETH's initial coin offering was similar to how founders in a company issue

04:21 stock in an initial public offering.

04:25 One of the measures determining whether something is a security has to do with centralized control,

04:29 and during the early days of Ethereum, its peer-to-peer network was controlled by a small

04:33 group of developers.

04:35 Over time, however, Ethereum and its governance have become more decentralized.

04:42 For full coverage, check out Stephen Ehrlich's piece on Forbes.com.

04:47 This is Kieran Meadows from Forbes.

04:50 Thanks for tuning in.

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