The Chances of the SEC Approving Ethereum ETFs: A Critical Analysis

The Chances of the SEC Approving Ethereum ETFs: A Critical Analysis

Coinbase, one of the leading cryptocurrency exchanges, has stated that they believe there is a 30% to 40% chance of the SEC approving spot Ethereum ETFs by the end of the month. This prediction comes from their Institutional Research Analyst, David Han. He pointed out that the correlation between CME futures products and spot exchange rates was a significant factor in the approval of spot Bitcoin ETFs by the SEC. Han expressed optimism, noting that there could be a “surprise to the upside” in the decision. He also mentioned that the Grayscale Ethereum Trust is currently trading at a 24% discount, indicating a potential opportunity for approval.

One of the reasons for Coinbase’s optimism stems from the role of cryptocurrency in US politics. Han suggested that denying spot Ethereum ETFs could result in the SEC spending political capital, a move that could be risky. Meanwhile, Bankless founder Ryan Sean Adams highlighted the impact of Democrats becoming more favorable towards crypto due to potential electoral concerns. The presence of both Democratic and Republican commissioners at the SEC adds a layer of complexity to the decision-making process.

Decision Deadlines

Han also pointed out that not all spot ETF applications have the same deadline for a decision. While VanEck’s application must be decided by May 23, BlackRock and Fidelity have until August for their applications. He even suggested that a rejection on May 23 could lead to legal action that might overturn the decision. This strategy has been observed before when Grayscale’s lawsuit influenced the approval of spot Bitcoin ETFs in the past.

Bloomberg analyst Eric Balchunas offered a different perspective on Coinbase’s prediction, calling it a “risk-free PR move” to make an out-of-the-money call option for notoriety. He labeled his own predictions as “braver and riskier reputationally,” indicating a sense of skepticism towards the approval of spot Ethereum ETFs. Despite the low odds provided by crowd-sourced estimates and Balchunas himself, Coinbase remains optimistic about the SEC’s decision.

The potential approval of spot Ethereum ETFs by the SEC remains uncertain. While Coinbase and some industry experts are hopeful based on various factors such as political considerations and past decisions, there is still a significant level of skepticism surrounding the likelihood of approval. As the deadline for the decision approaches, the crypto community eagerly awaits the SEC’s announcement, which could have a significant impact on the future of Ethereum and the broader cryptocurrency market.


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