Goldman’s Digital Assets Chief Bets on Spot Ether ETFs Getting the Thumbs Up

Mathew McDermott, the head of digital assets at Goldman Sachs, stated on Tuesday that he expects spot Ether ETFs to be approved in the coming months.

During a CNBC interview, McDermott said a major factor in the approval decision hinges on whether ether is classified as a security.

“A big question naturally centers around whether it’s perceived to be a security or not,” he told the outlet.

“I think that will ultimately be determined, and on whether it gets approved. There are different schools of thought, but I remain positive that they will,” he added.

His comments come after the Securities and Exchange Commission (SEC) approved 11 spot Bitcoin ETFs on Jan. 10, a key development for the industry after initial rejections.

Notable approvals include BlackRock’s iShares Bitcoin Trust (IBIT), VanEck Bitcoin Trust (HODL), and Grayscale Bitcoin Trust (GBTC).

Goldman expected the SEC approval and the bank has an “incredibly positive” view of its market impact, according to McDermott.

“Seeing big regulated institutions having that ability to issue Bitcoin ETFs is a very powerful statement for the market,” he said.

Cost benefits of spot Bitcoin ETFs

McDermott noted that investing in bitcoin through these ETFs is more cost-effective compared to direct crypto investment.

A spot Bitcoin ETF allows investors to gain exposure to bitcoin’s price movements without owning the cryptocurrency itself, as the ETF holds actual bitcoin.

The cost of investing in bitcoin was higher and this led to noticeable pressure on asset managers regarding ETF fees.

Still, there are downsides. McDermott observed that high investments and scarcity of the underlying asset may pose future risks.

More complexities than bitcoin ETF approval?

TradFi institutions like Blackrock, Fidelity, and VanEck have submitted applications for spot Ethereum ETFs to the SEC.

Currently, seven such ETFs await approval. And Bloomberg ETF Analyst Eric Balchunas has estimated a 70% chance of a spot Ethereum ETF approval by May.

Yet, approval for a spot Ether ETF is not clear-cut. The uncertain status of ether as a security causes approval challenges. This contrasts with the established classification of bitcoin as a commodity.

Further, SEC Chair Gary Gensler has stressed that approving a spot Bitcoin ETF does not guarantee automatic approval for other crypto ETFs.

The approval of a spot Ether ETF by the SEC is uncertain, as JPMorgan estimates a 50% probability of it being approved by May. This indicates a cautious outlook by the regulatory body towards the cryptocurrency market. A spot Ether ETF could potentially provide investors with a…

— ÑEÑE (@awoo02) January 22, 2024

SEC’s decision on first spot Ether ETF due May 23

The SEC’s first decision on a spot Ethereum ETF application is expected by May 23, according to a Jan. 23 Deutsche Bank research note. VanEck is among the applicants awaiting a verdict.

Upcoming ETF approvals could drive further adoption by allowing direct crypto exposure, according to Deutsche research analysts Marion Laboure and Cassidy Ainsworth-Grace.