Ether slips after SEC opens the door to ether ETFs, still heads for best week in more than a year

Ether slipped on Friday even after the Securities and Exchange Commission approved a rule change that will pave the way for exchange traded funds that buy and hold the cryptocurrency.

The price of ether fell more than 1% to around $3,718.98, according to Coin Metrics. It's holding on to its weekly gain of 20%, and is on pace for its best week in more than a year.  

"Today's market behavior seems more like a pause as investors digest recent gains and assess the impact of external economic factors, including the recent rates sell-off," said Rachel Lin, CEO and co-founder of the decentralized derivatives trading platform SynFutures. "This pause likely also reflects a cautious approach given the ongoing uncertainty about the timeline for regulatory approvals, such as S-1 filings."

ETH ETF approvals were priced in earlier in the week

Earlier this week surged more than 20% over two days, as expectations of an SEC approval of ether ETF applications changed abruptly. The previous consensus was that the agency was unlikely to greenlight the new funds, based on the lack of engagement by the agency on the filings. By contrast, in the weeks leading up to approvals for bitcoin ETFs, the SEC was reported to be engaging actively with fund issuers.

Alex Saleh, head of partnerships at blockchain protection firm Coincover, said that although Thursday evening's approval was priced in quickly, uncertainty remains about the timing of when the new products will hit the market, and which players will participate.

"This uncertainty makes it difficult to predict any changes in demand that will lead to further price discovery," he said. "Calls by major industry players that this confirms ether's status as a commodity are also introducing further market uncertainty, with many investors waiting to see the regulatory outcome of the commodities versus securities debate."

Coinbase, which may be a beneficiary of ether ETFs, jumped more than 6%, while Robinhood added 3%. While both companies offer cryptocurrency trading, Coinbase could stand to benefit more from the introduction of ether ETFs as it offers a slew of other crypto services, including custody and staking, as well as a larger selection of tradeable assets. Coinbase also operates a blockchain, called Base, that is built on the Ethereum network.

Cryptocurrency prices, including ether's, may also be tempered by the Thursday afternoon stock market sell-off. Stronger than expected services and manufacturing data for May and initial jobless claims for the week ending May 18 dampened investors' hopes for a September rate cut. ETF optimism kept ether afloat, but bitcoin fell about 4%. On Friday the flagship cryptocurrency hovered above the flat line for the day and week.