The US Securities and Exchange Commission (SEC) has given its final approval to a spot Ethereum ETF, marking a “significant milestone” for the world’s second-largest cryptocurrency.

In May, the SEC approved the first stage of 19b-4 filings, which set the stage for the listing of these ETFs.

This week, a little more than two months later, it approved the latest S-1 filings of seven fund managers — 21Shares, Bitwise Asset Management, BlackRock, Invesco, Franklin Templeton, Fidelity Investments and VanEck — which could boosted trading in these ETFs as early as this week.

Speaking to InvestorDaily, BTC Markets CEO Carolyn Bowler welcomed the announcement, noting that it highlighted the growing acceptance of digital assets within the regulatory framework.

"The SEC's approval of the Ethereum ETF marks a major advance for the asset class," Bowler said.

“For Australian crypto investors, this highlights the growing mainstream adoption and institutional interest in Ethereum. This development could inspire greater confidence and participation in the crypto market, potentially influencing the regulatory outlook and market dynamics at the local level.”

She added: “It has to beg the question of when we'll see [something] similar to the ASX.”

Bowler noted that the approval is also likely to serve as a catalyst for further institutional investment that can benefit from an "affordable regulated investment vehicle" of an ETF shell.

"This could lead to significant capital inflows, strengthening Ethereum's market position and driving wider adoption," she said.

Earlier this year, the SEC approved its first cryptocurrency ETFs when it gave the green light to a Bitcoin ETF in January, a move that is believed to have had a measurable impact on prices and capital flows.

As of July 23, bitcoin prices are up more than 50% year-to-date, reaching over $66,700.

Given this trend in Bitcoin, Bowler said the SEC's latest approval is likely to generate positive sentiment and increased demand for Ethereum and could continue to impact prices.

However, she reiterated that it remains a challenge to predict exact price movements.

"Analysts suggest this could push the price of Ether higher, with Wintermute, an algorithmic trading firm, predicting potential gains of up to 24 percent over the next year," Bowler said.

Global X investment strategist Billy Leung agreed that historical trends could point to potential double-digit gains for Ethereum amid improved ETF flows.

He specified that Bitcoin ETF inflows have been approximately US$16.4 billion year-to-date, with each US$1 billion of ETF inflows resulting in roughly a 4% price increase.

“We do not provide specific price targets. However, our analysis of US Bitcoin ETF flows shows a strong correlation between ETF inflows and price movements,” Leung said.

Roughly 30 to 40 percent of bitcoin's price movement can be attributed to ETF flows, he said.

Applying a similar model to Ethereum, and given that its market capitalization is approximately 33 percent of Bitcoin, he estimated such proportional ETF inflows "could potentially increase the price of Ethereum by approximately 20 percent over a similar time frame​​".

Benjamin Selermeier, director of Magnet Capital, emphasized that Ethereum ETF trading will lead to a new source of demand for the cryptocurrency that has been unavailable in the past.

"We've seen how positive this has been for the price of Bitcoin, and I would expect it to be just as positive for Ethereum in the short, medium and long term," he told InvestorDaily, noting that ETFs "are generally well-sustained long-term sources of patient capital'.

“For the first time, Ethereum will be a trillion dollar investable asset managed by wealth advisors and asset allocators.

"While anything can happen in the short term, turning on this demand faucet will create very positive price pressure for ether, Ethereum's native asset, in the medium term."

The broader crypto industry is also likely to reap the benefits of the SEC's latest ruling, as it shines a greater light on investor awareness, education and participation, he said.

A reason for caution

However, while the potential price gains may prove attractive to investors, the cryptocurrency's volatility as an asset class requires consideration of its role in an investment portfolio, according to Betashares' head of digital assets, Justin Arzadon.

Acknowledging that the SEC's latest ruling was a "remarkable milestone," he reiterated that it remains "early days" for digital asset adoption by mainstream finance.

"While digital assets are slowly playing a more significant role in traditional finance, they will continue to be a highly volatile asset class for the foreseeable future," Arzadon said.

In light of this, he said investors would be better served "by building a robust portfolio using Australian and international shares, bonds and other asset classes as a core".

Along with that, investors may want to consider a very small allocation to digital assets, he said.