Crypto ETFs: Where Is the Next Momentum?
The Peak of Halving and ETF Momentum
Central Bank Digital Currencies as the Real Turning Point
Bitcoin appears to be facing strong resistance around the USD 70,000 level—near its previous peak during the liquidity-driven rally of 2021. The momentum from the approval of spot Bitcoin ETFs and the quadrennial halving, which cuts mining rewards in half, is gradually fading. The remaining near-term catalyst is the U.S. Securities and Exchange Commission’s (SEC) decision on a spot Ethereum ETF, scheduled for May 23. Market consensus places the probability of approval at below 50%.
At the SEC, the key issues surrounding a spot Ethereum ETF are whether Ethereum qualifies as a non-security and concerns over centralization risk. Bitcoin was approved as a commodity rather than a security, allowing it to bypass stricter regulatory hurdles. Ethereum, however, occupies a more ambiguous position.
Bitcoin transactions are validated through Proof of Work (PoW), where miners solve complex mathematical problems using computing power and are rewarded with Bitcoin. Ethereum, by contrast, transitioned in September 2022 to Proof of Stake (PoS), reigniting the debate over whether it should be considered a security.
Under PoS, holders can stake their Ethereum—depositing it into the network to help validate transactions—and receive rewards akin to interest payments, proportional to their stake. Because this process involves third parties such as staking pool operators and validators receiving compensation, critics argue that Ethereum meets the criteria of a security under the Howey Test, a long-standing U.S. Supreme Court standard for determining securities. If deemed a security, SEC approval for a spot ETF would become exceedingly difficult.
That said, Lim Min-ho, a digital asset analyst at Shin Young Securities, argues that the SEC may find it hard to deny Ethereum’s non-security status outright. When Ethereum futures ETFs were approved in 2023, the SEC did not object to Ethereum being classified as a commodity. Moreover, when the SEC filed lawsuits against Coinbase for operating as an unregistered securities broker, Ethereum was notably absent from the list of alleged securities.
The second major concern is centralization. If a spot ETF is approved, large inflows of capital could concentrate Ethereum holdings within ETF structures. Should staking be incorporated as a yield-enhancement strategy, a small number of institutions could end up controlling a significant share of staked ETH, undermining network decentralization. In fact, U.S. asset managers Franklin Templeton and ARK have already filed applications for spot Ethereum ETFs that include staking strategies.
Another issue is the correlation between futures and spot prices on the Chicago Mercantile Exchange (CME). This correlation was one of the key legal arguments supporting the approval of spot Bitcoin ETFs. While Bitcoin futures have traded on the CME since December 2017—providing a long history of liquidity and price discovery—Ethereum futures were launched only in February 2021, offering a shorter and potentially less reliable track record.
In summary, the SEC could approve a spot Ethereum ETF in May to avoid legal ambiguity around Ethereum’s status. However, the more widely held view is that approval is unlikely in the near term due to centralization concerns and insufficient confidence in futures–spot price correlations. Looking further ahead, the odds improve significantly in 2025, when regulatory familiarity deepens and longer correlation data becomes available.
From a market perspective, the May decision may prove more about volatility than long-term direction. Expectations around the halving and ETF approvals are already largely priced in. Paradoxically, a rejection in May—keeping the possibility of approval alive in 2025—might even be more supportive for prices.
The true long-term inflection point may lie elsewhere: in the realization of central bank digital currencies (CBDCs). Today’s international remittances rely heavily on the SWIFT network, which typically charges fees of 4–6% and takes two to three days to settle. Cross-border payments are also effectively dependent on U.S.-based private card networks. These inefficiencies explain why more than 100 central banks are exploring blockchain-based CBDCs.
China has been particularly aggressive, planning to issue more than 15% of its monetary base as digital yuan by 2029. The Bank for International Settlements (BIS) estimates that 24 countries will have launched CBDCs by 2030 and urges governments to accelerate legal frameworks. The European Central Bank (ECB) has also been proactive, proposing digital euro legislation in 2023 and updating its CBDC Rule Book in January this year.
By contrast, Federal Reserve Chair Jerome Powell has stated that a U.S. CBDC remains a distant prospect. Blockchain-based digital currencies could challenge the dollar’s global dominance, making U.S. caution understandable. Still, the debate is unlikely to fade. French Hill, the current vice chairman of the House Financial Services Committee and a vocal supporter of crypto-friendly policies, recently announced his bid for the committee chairmanship—keeping digital currency firmly on the political agenda.
Gold is accumulated by central banks as a reserve asset. Cryptocurrencies, however, differ in that central banks can issue a substitute in the form of CBDCs. Yet a former global quantitative hedge fund manager now working in crypto argues that CBDC issuance could actually expand the crypto ecosystem. By establishing blockchain infrastructure, CBDCs may enable a broader range of crypto-based services—much like electric vehicles and hydrogen cars required charging infrastructure before widespread adoption.
Assets that rise on expectations often fall when realization is delayed. Over time, however, real-world applications emerge, laying the groundwork for innovation. This is the recurring pattern of bubbles and breakthroughs. Cryptocurrencies, still surrounded by debate and skepticism, now stand at a crossroads—one that will determine whether they ultimately follow the path of speculation or innovation.