We don't know the origin of the word "elf".

In the recent past, it was a generic term for any spirit. Under a Christian view of the world, elves were pagan spirits and therefore evil. You can check out the lyrics to the song "seven hundred elves", involving a farmer defending himself from forest spirits by hanging crosses around his house.

https://mainlynorfolk.info/steeleye.span/songs/sevenhundrede...

(Note that apparently this song uses "elves" to translate a Danish reference to "trolls".)

But this usage is known not to be the original view of elves. When the word originated, it didn't refer to something bad, as we can tell by the fact that so many Germanic names include an "elf" element: Alfric ("king of the elves"), Alvin ("friend of the elves"), Alfred ("advised by the elves"), etc.

Old elf mythology appears to have thought of them as human-like spirits, who might be conventionally or sexually dangerous, but who weren't evil.

https://en.wikipedia.org/wiki/Elf

Another interpretation is that fairies (and their Scandinavian equivalents, trolls) represented prechristian, or unchristianized, peoples. They were an "other" and that means something strange and foreign, and likely but not necessarily dangerous.

Concerning the steeleye span song, I'd like to point out that, the elves' perspective is that their home was under attack by the farmer