Key Points
- The SEC’s lack of communication regarding Ether ETFs could indicate a low likelihood of approval by May.
- Bloomberg ETF analyst Eric Balchunas has downgraded the chances of Ether ETF approval to 35%.
The Securities and Exchange Commission (SEC) has been silent regarding Ether (ETH) exchange-traded funds (ETFs), which may not bode well for those anticipating approvals by May.
Eric Balchunas, an ETF analyst at Bloomberg, has cited several reasons for reducing the probability of an Ether ETF approval to a mere 35%.
Reasons for Lowered Expectations
Balchunas highlighted the lack of engagement from the SEC with issuers as a primary concern. With only 73 days remaining until the final deadline and no comments from the SEC, the process seems to be stalled.
Balchunas also suggested that the SEC might be intentionally withholding communication. He further pointed out that SEC Chair Gary Gensler’s perspective on Ether, which he still views as a security, could also be influencing the situation.
Following the approval of spot Bitcoin ETFs and a court loss to Grayscale in August 2023, Gensler might be hesitant to face more political backlash. Balchunas interpreted Gensler’s stance as: “You should be satisfied now.”
Comparing Ether and Bitcoin ETF Processes
Balchunas noted that the ETF process for Ether feels like the “reverse” of the Bitcoin ETF process. He described this difference as a guiding factor in his assessment.
ETF Store president Nate Geraci questioned the SEC’s decision to approve several ETH futures ETF products in October, only to potentially reject spot products in May, without providing much explanation.
Meanwhile, Matt Corva, the general counsel at Consensys, suggested that an ETH ETF denial could be beneficial in the long run, as it would remove the arbitrary ground to battle against other coins.
On March 6, crypto exchange giant Coinbase and asset manager Grayscale met with SEC officials to discuss a rule change to launch spot Ether exchange-traded funds. Despite the positive outlook from many in the crypto industry, Balchunas cited a “strong” thesis from VB Capital general partner Scott Johnsson that denial seemed more likely.
Johnsson argued that the meeting was not between prospective fund issuers and was largely focused on the correlation between the prices of ETH and BTC futures compared to spot. This correlation analysis could serve as grounds for the ETF’s approval or denial.
If the SEC were to reject all pending Ethereum ETF applications, Balchunas identified Tuesday, Nov. 5, the day of the U.S. Presidential election, as the next crucial date. He stated that even if President Biden wins, the people running things could change, which could result in Gensler moving.
However, Balchunas remained confident that a spot Ether ETF would eventually be approved, stating that “the more time that goes by, the more this stuff gets worked out.”
