For the future trend of Ethereum, the market is paying close attention to next week on May 23 when the U.S. Securities and Exchange Commission (SEC) must make a final approval or rejection decision on at least one Ethereum spot ETF application.
If approved, it may be expected to replicate the situation of Bitcoin spot ETH and stimulate the price of Ethereum to rise. (Note: May 23 is the final approval deadline for VanEck applications)
Multiple fund houses expect Ethereum spot ETF rejection
However, Bloomberg reported today (18th), citing people familiar with the matter, that some fund companies are expected to be rejected because private contacts between applicant companies and the SEC are not as frequent as before the approval of the Bitcoin spot ETF in January.
At that time, in the final weeks before the SEC approved the Bitcoin spot ETF, fund companies submitted multiple versions of revised documents to meet the SEC’s requirements, which paved the way for their approval. In contrast, the Ethereum spot ETF has much less interaction with the SEC.
Katherine Dowling, general counsel of Bitwise, who applied for the Ethereum spot ETF in March, said that the market has generally expected to receive a negative decision:
If an approval is anticipated, it would usually be accompanied by some public activity, but these have not materialized yet.
Coinbase estimates the likelihood of approval to be 30% to 40%
In addition, Coinbase, the largest exchange in the United States, is also pessimistic that the possibility of the SEC approving an Ethereum spot ETF at the end of this month is only between 30% and 40%. However, in his " Ethereum Outlook " report on the 15th, its analyst David Han still pointed out that there is a key factor that may prompt SEC approval, and that is the correlation between CME futures products and spot exchange rates.
The report reads:
The correlation between CME's futures products and spot rates is sufficiently high that "CME's monitoring can reasonably be expected to detect inappropriate behavior in the spot market." Additionally, the correlation study period at the time of BTC spot ETF approval began in March 2021, one month after the launch of CME ETH futures, and we believe this evaluation period was intentionally chosen so that similar reasoning could be applied to the ETH market.
In fact, correlation analysis presented by Coinbase and Grayscale shows that the ETH market’s spot and futures correlations are similar to those of BTC.
Han further stated that assuming this correlation analysis holds true, the remaining reasons for disapproval may stem from the essential differences between Ethereum and Bitcoin, such as scale, depth, and the most critical differences in consensus mechanisms.
Han acknowledged that the SEC’s silence has created “uncertainty” in the market and that a staking-enabled Ethereum spot ETF is unlikely to be approved in the short term.
Extended reading: Fidelity applies to add “pledge” services to Ethereum spot ETFs to create more income! Lido, RocketPool jump on news
Another reason for Han's optimism is that as cryptocurrencies become an election issue, he believes it has become less certain that the SEC will be willing to use its political capital to reject the launch of an Ethereum spot ETF.
However, he emphasized that even if he is rejected on the first deadline of next week on the 23rd, he still believes that the possibility that the issuer can overturn this decision through litigation is high; in addition, he pointed out that not all Ethereum spot ETF applications All must be approved at the same time.
Bloomberg Analyst: This is Coinbase ’s PR strategy
Regarding Coinbase’s analysis, Bloomberg analyst Eric Balchunas responded:
Just days before spot Bitcoin was approved, someone made a last-minute claim that it would be "vetoed" because there was nothing to lose. This approach is like a deep out-of-the-money call that, if by chance, comes true, could make them famous overnight. If they guess wrong, they have nothing to lose. This is a zero-risk PR strategy. The same is true this time.
Balchunas also issued a lower estimate on May 14, when he said the likelihood of an Ethereum spot ETF being approved was "negligible."
