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- Analysts have reduced the odds of spot Ethereum ETF approvals to 25%.
- Industry veterans believe longer delays in approval might help TradFi adjust to crypto more.
Recent developments including an investigation from the United States Securities and Exchange Commission (SEC) appear to have cast a shadow of doubt over the immediate prospects of a spot Ethereum Exchange-Traded Fund (ETF) launch. Bloomberg ETF expert Eric Balchunas recently reduced the probability of the ETF being approved by May 23, the final application deadline, to 25%.
Getting tagged in tweets about this filing, the Eth corr study, and other eth etf hopium. I respect it all but our odds for Eth ETF approval in May remain a pessimistic 25% (I’d go lower if I could tbh). There’s 7 wks till deadline and radio silence from SEC = bleak. (Again,… https://t.co/fc8elrYm64
— Eric Balchunas (@EricBalchunas) March 28, 2024
Factors Contributing to Ethereum ETF’s Pessimistic Outlook
As previously reported by Crypto News Flash, the Ethereum Foundation was subpoenaed by the SEC regarding the classification of Ethereum as a security. The SEC’s position on Ethereum classification has historically been complex. In 2018, William Hinman, then-director of Corporation Finance, determined that Ethereum was not a security.
Gary Gensler, the agency’s current Chairman, has voiced a different perspective. He has argued that Proof-of-Stake (PoS) tokens could constitute securities, but he has avoided specifically referencing Ethereum.
Adding to the pessimistic outlook on the Ethereum ETF approval is the lack of communication between the SEC and ETF applicants. Per Crypto News Flash’s earlier announcement, the SEC has delayed its decision to approve the highly anticipated spot Ethereum ETFs proposed by financial giants BlackRock and Fidelity Investments.
Echoing sentiments from Balchunas, Nic Puckrin, CEO of Coin Bureau stated in a post on X that the Polymarket prediction market has predicted a probability at 19% for the Ethereum ETF launch in May. He, however, noted that the delay may be a blessing in disguise.
“In case it wasn’t obvious, the chances of an ETH ETF by May are pretty low. The Polymarket prediction market has a probability of 19%. But, perhaps this is a good thing?”, Puckrin inquired.
Is the Timing for Spot Ethereum ETFs Launch Right?
Puckrin added that the time for the Ethereum ETF launch is not right. He emphasized that in October of last year, the launching of ETH futures ETFs was deemed a flop in comparison to the Bitcoin Futures ETF flows. According to him, there is little indication that simply because ETH ETFs are spot products, interest will increase. His opinion stems from the fact that the broader TradFi investors are still processing the Bitcoin ETF products, and therefore unlikely to choose to invest in an alternative product at the moment.
Furthermore, Puckrin disputes the fundamental value of Ethereum ETFs in the absence of yield-generating processes like staking. He highlights the regulatory scrutiny of Ethereum’s staking feature, citing the SEC’s concern in potentially classifying ETH as a security. He points out that the SEC’s desire to designate ETH as a security due to its staking capabilities puts the approval process in jeopardy.
Similar to Puckrin’s view, Matt Hougan of Bitwise indicated a preference for delaying all ETH ETF approvals until December. Hougan believes that allowing traditional finance sectors more time to adjust to Bitcoin and the broader crypto ecosystem would strengthen and attract more investors to the Ethereum ETF market.
