On May 24, 2025, at 5:00 AM UTC, the U.S. Securities and Exchange Commission (SEC) approved the 19b-4 filings for multiple spot Ethereum ETFs, including those from BlackRock, Fidelity, and Grayscale. While this marks a pivotal regulatory milestone, the greenlight does not immediately allow these funds to begin trading. ETF issuers must still secure approval for their S-1 registration statements—a separate and essential step before market launch.
Market analysts project that Ethereum spot ETFs could go live by mid-June or as late as August. Despite the optimism, Ethereum’s price has remained in the $3,700–$3,850 range post-approval, briefly peaking near $3,900 but failing to ignite the anticipated explosive rally.
This raises a critical question: Why hasn’t ETH surged following such a major regulatory breakthrough? Let’s break down the technical, structural, and market sentiment factors behind this muted reaction.
Understanding the Two-Step ETF Approval Process
A common misconception in the crypto community is equating 19b-4 approval with full ETF launch readiness. In reality, two distinct regulatory filings are required:
- 19b-4 Form: Filed by exchanges to propose rule changes allowing a new product (like an ETF) to trade. SEC approval here means the concept is acceptable.
- S-1 Registration Statement: Filed by the ETF issuer, detailing fund structure, fees, custody, and operational mechanics. This must be declared effective by the SEC before trading begins.
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As BITWU.ETH clarified, 19b-4 approval signals progress, but S-1 effectiveness is the true go-live signal. Historically, this final step takes weeks or even months. Investors aware of this timeline are less likely to front-run aggressively, dampening immediate price momentum.
Market Expectations vs. Reality
The sudden shift in SEC stance—from a mere 7% approval probability to over 75%—fueled speculative buying in the weeks leading up to the decision. Much of the bullish sentiment was already priced in.
Moreover, unlike Bitcoin ETFs, which faced skepticism until approval, Ethereum’s case involved higher uncertainty due to its classification debates (commodity vs. security). Once clarity emerged, traders reacted—but without the same level of surprise factor that drove BTC’s post-ETF rally.
Key Factors Limiting Immediate Upside:
- Anticipated supply overhang, particularly from Grayscale’s Ethereum Trust (ETHE), estimated at $10 billion.
- Fee structures and lack of staking rewards in traditional ETFs reduce long-term yield appeal.
- Institutional inflows may be gradual, not explosive, as pension funds and asset managers conduct due diligence.
The Grayscale Overhang: A Looming Pressure Point
One of the most cited concerns comes from LianYanShe, who highlights a crucial difference between Bitcoin and Ethereum ETF dynamics:
“Grayscale’s GBTC had a $21 billion sell-off pressure after ETF conversion. ETHE, while smaller (~$10B), could still trigger significant redemption-driven selling if investors exit the trust post-approval.”
If early ETF flows fail to match redemption volumes, net downward pressure on ETH price becomes likely. Given that Bitcoin ETFs saw only $300 million in first-day inflows despite massive hype, Ethereum may struggle to absorb similar outflows quickly.
This structural imbalance makes many investors cautious—prompting some to rotate profits into assets like BTC, BNB, or SOL ahead of actual trading commencement.
Macro Conditions: A Tailwind for Risk Assets
Despite short-term caution, macro indicators suggest favorable conditions for crypto growth:
- U.S. equity indices remain in bullish alignment.
- NVIDIA’s strong earnings and stock split signal continued tech sector strength.
- The VIX has dropped to its lowest level in a year, reflecting low market fear.
- FIT21 legislation momentum and election-year regulatory incentives add political tailwinds.
Kay Capital argues that the path of least resistance is upward, especially for ETH. With sentiment shifting and institutional infrastructure maturing, now may be the time to position ahead of broader market recognition.
“We’re front-running the dumb money. When traditional investors finally jump in, we’ll already be positioned.”
He maintains a 70% ETH and 30% PEPE allocation, betting on both foundational strength and speculative momentum.
Long-Term Vision: Beyond Single-Asset ETFs
Dovey Wan of Primitive Ventures emphasizes that while short-term pumps may be limited by fee drag and missed staking yields (~2.5% annually), the long-term implications are transformative.
She envisions a future where:
- Asset managers launch hybrid ETFs combining BTC, ETH, SOL with traditional assets like gold or FAANG stocks.
- Retirement accounts (e.g., 401k) gain seamless access to crypto via regulated products.
- Crypto becomes embedded in mainstream portfolios through diversified index structures.
This evolution mirrors how CME Bitcoin futures—launched in 2017—only gained real traction years later. Similarly, Ethereum ETFs may serve as foundational infrastructure for multi-cycle adoption.
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Will This Spark a Broader Altcoin Rally?
Many experts believe yes. Once ETH ETF trading begins, investor psychology will shift dramatically. As Kay Capital notes:
“Shitcoin ETFs aren’t far behind. Once one passes, the floodgates open.”
Markets may begin pricing in potential ETF approvals for Solana (SOL), Avalanche (AVAX), or even meme coins like DOGE and PEPE—regardless of current SEC classifications. Momentum and narrative often outweigh regulatory nuance in bull markets.
Fiona points out that Democratic support played a key role in accelerating ETH ETF approval, especially with elections approaching. This political will could extend to broader pro-innovation crypto policies.
Frequently Asked Questions
Q: Does 19b-4 approval mean Ethereum ETFs are live?
A: No. 19b-4 approval allows exchanges to list the ETFs, but actual trading requires S-1 registration effectiveness. This process typically takes several weeks.
Q: Why hasn’t ETH price gone up after approval?
A: Much of the positive news was already priced in. Additionally, uncertainty around S-1 timing, Grayscale outflows, and lack of staking rewards have tempered immediate enthusiasm.
Q: Could Grayscale’s ETHE cause a price drop?
A: Yes. If redemptions exceed new inflows into competing ETFs, selling pressure could temporarily outweigh demand.
Q: What happens when ETH ETFs finally launch?
A: We expect increased institutional participation, improved market depth, and potential spillover demand into altcoins—especially proof-of-stake and high-throughput blockchains.
Q: Is now a good time to buy ETH?
A: For long-term investors, current prices offer a strategic entry point before full adoption. However, short-term volatility around ETF launch remains likely.
Q: Will other cryptocurrencies get ETFs?
A: Approval of ETH ETF sets a powerful precedent. SOL, ADA, and others may follow, especially if they can demonstrate decentralization and compliance.
Final Thoughts: Positioning for the Next Phase
The approval of Ethereum spot ETFs is not just a regulatory win—it’s a structural transformation of crypto’s place in global finance. While immediate price action has been restrained by technical realities and profit-taking, the long-term trajectory appears firmly bullish.
Investors should focus on what comes next: S-1 effectiveness timelines, initial inflow data, and macro liquidity trends. Those who understand the difference between news headlines and market mechanics will be best positioned to benefit.
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