The Outlook for Spot Ethereum ETFs Approval by the SEC

The Outlook for Spot Ethereum ETFs Approval by the SEC

According to Crypto exchange Coinbase’s Institutional Research Analyst, David Han, the chances of the SEC approving spot Ethereum ETFs by the end of the month range between 30% to 40%. In his report dated May 15, Han indicated that the SEC’s decision to approve spot Bitcoin ETFs was influenced by the correlation between CME futures product and spot exchange rates. This correlation could also play a role in the approval of spot Ethereum ETFs. Despite the uncertainties surrounding the SEC’s stance on the matter, Han expressed optimism by stating that there is potential for a positive outcome on this decision.

Han also highlighted the significant role that cryptocurrency plays in US politics, suggesting that the SEC’s approval or denial of spot Ethereum ETFs could have political implications. The notion that the SEC might risk losing political capital by rejecting spot ETH ETFs was echoed by Bankless founder Ryan Sean Adams. Adams implied that recent political developments, especially those concerning the anti-crypto stance of the SEC chair, could influence the decision-making process at the agency.

The divide between Democrats and Republicans regarding cryptocurrency was also brought to light in the analysis. While SEC Chair Gensler and the majority of voting commissioners are Democrats, there seems to be a sentiment that cryptocurrency aligns more with Republican values. Uniswap founder Hayden Adams even described crypto as a rallying point for Republicans in contrast to the regulatory approach of the Biden administration. This political backdrop could potentially sway the SEC’s decision on spot Ethereum ETFs.

Han noted that the SEC is not bound to approve all spot ETF applications simultaneously. Each application has a different deadline for a decision to be made. While VanEck’s application must be decided by May 23, other applications from BlackRock and Fidelity have until August. Han also pointed out the possibility of legal action in the event of a rejection on May 23, similar to the Grayscale lawsuit that influenced the approval of spot Bitcoin ETFs.

Coinbase’s contrarian and optimistic stance on the approval of spot Ethereum ETFs was viewed skeptically by Bloomberg analyst Eric Balchunas. Balchunas questioned the motives behind Coinbase’s prediction, suggesting that it might be a risk-free public relations move. He emphasized the reputational risks associated with making bold predictions in the crypto market, especially when the odds of approval are perceived to be low. Crowd-sourced estimates also indicated low approval odds for spot Ethereum ETFs, aligning with the generally pessimistic sentiment in the market.

The outlook for spot Ethereum ETFs approval by the SEC remains uncertain and subject to various external factors, including political influences, legal considerations, and market sentiment. While Coinbase’s prediction leans towards optimism, the reality of the SEC’s decision-making process is complex and multifaceted. Traders and investors in the crypto space should carefully monitor developments and be prepared for potential surprises in the approval or rejection of spot Ethereum ETFs.


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