In what’s some big news for crypto, the SEC’s greenlight for Ethereum Spot ETFs has been hailed as a game-changer. It’s paving the way for mainstream investment in the world’s second-largest cryptocurrency. But there’s a twist: staking, a way to earn passive income on Ethereum, is excluded from these ETFs.
What does this mean for investors and the future of Ethereum? Read on to find out!
The decision to exclude staking from ETH ETFs brings both excitement and strategic advantages for the Ethereum ecosystem. Crypto journalist Laura Shin, host of the Unchained podcast, explains these implications.
One significant effect is that direct stakers could enjoy higher returns. The staking rewards, about 3% APY, are not available to ETF holders. Instead, these rewards will go to those who stake their ETH directly or use staking services like Lido or Rocket Pool.
This results in a value transfer, boosting the returns for stakers at the expense of non-stakers.
“This value transfer benefits those who engage in staking, enhancing their returns at the expense of non-stakers.“
Lauran Shin
Another benefit of excluding staking from ETFs is that it helps address Ethereum’s high staking ratio issues. A high staking ratio can increase centralization and liquidity risks, potentially destabilizing the network.
By not including staking, these ETFs lock up ETH liquidity without adding to staking contracts, promoting a healthier network balance. This approach helps maintain a better ratio of staked to non-staked ETH, easing community concerns about excessive staking.
The SEC’s decision to exclude staking aligns with a strategy of simplifying the process before tackling more complex issues.
On the Unchained podcast, Matt Hougan, CIO of Bitwise, explains,
“The first shot on goal will be let’s get to 90%, which is without staking, and then let’s worry about the complications later and down the road.”
This cautious approach aims to ensure both regulatory compliance and market stability.
ETH spot ETF approvals are expected to attract significant institutional investments, potentially increasing market liquidity and stability. Estimates suggest that inflows could range from $15 billion to $45 billion in the first year.
Standard Chartered analyst Geoffrey Kendrick notes that this approval indicates that ETH and similar cryptocurrencies might not be considered securities, paving the way for further ETF approvals. Now that the “crypto industry has political back”, the support for digital assets continues to grow.
This approval sets a precedent for other altcoins, such as XRP and Solana, which are also awaiting ETF approval. Crypto analyst Nick highlights several factors driving XRP’s potential, including tokenization, the possible IPO of Ripple, and the growing use of the XRP Ledger (XRPL).
He points out how eyes are now on what the BTC pair is doing.
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The SEC’s cautious yet forward-thinking stance on Ethereum spot ETFs signals a new era of institutional adoption and regulatory clarity for the crypto market. Good times are finally here…or are they? Time will tell.
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