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- Coinbase believes that ETH ETF approval is inevitable, comparing the situation to the SEC’s approval of a Bitcoin ETF earlier this year, and estimating a 30-40% chance of approval by May 31, 2024.
- Spot Ethereum ETF approval requires the SEC to greenlight 19b-4 filings and S-1 registration forms.
Although the price of Ethereum has been trading under pressure for the past few weeks around the $3,000 level, a recent report from Coinbase says that an upward surprise is imminent for Ethereum investors. This surprise could happen against the backdrop of decisions surrounding a spot Ethereum ETF, ahead of this week, according to a Crypto News Flash report.
In a recent note, Coinbase Institutional asserted that ETH ETF approval is a matter of when, not if. They believe that the US Securities and Exchange Commission (SEC) is likely approaching the decision on the same grounds that were used to approve the Bitcoin (BTC) ETF earlier this year.
Coinbase highlighted that the SEC considered the strong correlation between BTC spot prices on the Chicago Mercantile Exchange (CME), which also applies to Ethereum. The crypto exchange adds:
We think there is room for surprise on this decision. Polymarket priced in a May 31, 2024 approval chance of 16%, and Grayscale Ethereum Trust (ETHE) is trading at a 24% discount to net asset value (NAV). We believe the approval odds are closer to 30-40%.
As crypto starts to become an election issue, we think it is also less certain that the SEC will be willing to provide the necessary political capital to support a rejection. Even if the first deadline on May 23, 2024 suffers a denial, we think there is a high probability that litigation could reverse the decision.
SEC Approval for Ethereum Spot ETF Approval
Ethereum spot ETFs will directly hold Ether as their underlying asset and trade on stock exchanges just like stocks. To do this, they must receive SEC approval for 19b-4 filings and S-1 registration forms.
The SEC must approve both of these filings to legally sell the ETF to the public. Typically, the SEC has a legal period of 45 days, which can be extended to 240 days, to make an initial decision on a 19b-4 filing. Approval of the 19b-4 allows the ETF to be listed on an exchange. However, without S-1 approval, ETFs cannot be legally sold to investors, according to a Crypto News Flash report.
Even if the US SEC approves 19b-4s, it may delay S-1 approval, requiring extra time to review these documents. The lack of engagement between issuers and the SEC suggests that regulators may adopt a more cautious approach due to the complexity and risks associated with crypto products.
On the other hand, the Ethereum whale has triggered massive deposits of ETH to exchanges. On-chain data provider SpotonChain reported that a large whale, 0x7f1, deposited 15,000 ETH (worth $45.98 million) into Kraken at $3,065 per ETH four hours ago. The whale had previously withdrawn 120,874 ETH from Kraken at around $1,645 per ETH in early September 2022. Currently, the whale still owns 105,874 ETH (worth $326 million), for a total gain of $173 million (87%).
Giant whale 0x7f1 deposited 15,000 $ETH (45.98M) to #Kraken at $3,065 4 hours ago.
The whale withdrew 120,874 $ETH from #Kraken at only ~$1,645 in early Sep 2022,
And now still holds 105,874 $ETH ($326M) with a total profit of $173M (+87%)!
Follow @spotonchain and set alerts… pic.twitter.com/3wsgjQd4DI
— Spot On Chain (@spotonchain) May 20, 2024
