SEC Drops Hints of Greenlighting Ethereum ETFs, Sparking Speculation on Election Politics vs. Crypto Evolution

Is political pressure influencing the SEC’s consideration of spot Ether ETFs, and how does this impact the crypto community?

Table of Contents
– Current Situation and Odds
– Potential Impact on BTC ETFs
– What to Expect Next?

Ethereum (ETH) has been experiencing a bullish trend, with its price reaching around $3,760 as of May 22, representing a 28% increase over the past week.

This surge is fueled by speculation that the U.S. Securities and Exchange Commission (SEC) may approve the first spot Ether exchange-traded funds (ETFs) this week.

In a surprising turn of events, on May 20, the SEC requested Nasdaq, CBOE, and NYSE to revise their applications for listing spot Ether ETFs. These exchanges were given a deadline to submit their amended applications by the end of Tuesday.

Following this request, multiple ETF issuers, including Fidelity, VanEck, and ARK/21Shares, promptly submitted their revised filings, known as Form 19b-4. These filings inform the SEC about a proposed rule change and are necessary for the approval of spot Ethereum ETFs.

As a result of this news, the price of Ether experienced a significant surge, jumping as much as 18% on Monday and settling around $3,700.

It’s worth noting that the first round of spot Ether ETF deadlines is approaching, with VanEck’s application due on May 23 and ARK Invest/21Shares’ on May 24.

The approval of these ETFs would be a major victory for the crypto industry and a surprise for many who were anticipating a rejection.

However, uncertainty still remains. The SEC, led by crypto skeptic Gary Gensler, has historically been cautious about approving spot crypto ETFs due to concerns about market manipulation.

Nevertheless, the recent court victory by Grayscale Investments, which compelled the SEC to approve spot Bitcoin ETFs, could potentially influence the decision on Ether ETFs.

In addition to the 19b-4 filing, ETF issuers also need to obtain S-1 approvals from the SEC. The S-1 form provides detailed information about the ETF, including its investment objectives, strategies, and risks.

The approval process for S-1 filings can vary and may take several weeks to months. Once the S-1 approvals are obtained, the ETF can go live and be traded on the market.

Therefore, it may still take some time before we see S-1 approvals and the launch of a live Ethereum ETF.

Now let’s discuss the potential political motivations behind the SEC’s change of heart and its implications for the upcoming elections.

There is speculation that the SEC’s decision could be politically influenced, possibly due to the upcoming elections.

Former President Donald Trump, who has recently shown support for crypto, criticized President Joe Biden’s understanding of the industry and hinted that crypto enthusiasts should back him.

This development has led some to believe that crypto has become a campaign issue, particularly as Democrats aim to attract young voters who are heavily involved in crypto.

Ji Kim, the Chief Legal and Policy Officer of the Crypto Council for Innovation, has also highlighted the significance of crypto to voters and its potential impact on elections, suggesting that crypto voters could be a crucial swing voting bloc.

Furthermore, the SEC’s previous approval of Ether futures ETFs in October 2023 could influence its decision on spot Ether ETFs. However, each application is evaluated independently based on its merits.

Market analysts and experts have been closely monitoring the situation. Bloomberg ETF analyst Eric Balchunas has increased the odds of spot Ethereum ETF approval from 25% to 75% after hearing rumors of a potential SEC reversal.

Geoff Kendrick, Head of FX Research and Digital Assets Research at Standard Chartered Bank, shares a similar level of confidence, estimating an 80% to 90% chance of approval this week.

As a result of these developments, the crypto betting platform Polymarket has witnessed a significant shift in odds. Initially priced at a 10% chance of ETF approval by May 31, the odds quickly soared to nearly 75% within hours and currently stand around 69%.

Those who bet on the platform could see substantial returns if the approval is granted.

Now let’s discuss the potential impact of Ethereum ETFs on BTC ETFs and the broader altcoin market.

The launch of spot ETH ETFs could have a significant impact on both BTC ETFs and the altcoin market as a whole.

Within just four months since their launch, spot BTC ETFs have accumulated an impressive $58 billion in assets under management (AUM), with industry leaders like Grayscale and BlackRock leading the way. This success raises questions about how ETH ETFs might compete with BTC ETFs.

Eric Balchunas compares the situation to a concert where Sister Hazel performs after Nirvana. This analogy suggests that Ether ETFs launching after Bitcoin ETFs might struggle to match the initial impact.

However, Balchunas predicts that ETH ETFs could capture between 10-15% of the assets currently held by BTC ETFs. While BTC ETFs may continue to dominate, there is potential for funds to flow from BTC to ETH, allowing ETH ETFs to establish a presence in the market.

The announcement of Ethereum ETFs has already had a significant impact, with a $100 billion movement in the crypto market cap following the news. This suggests that ETH ETFs could be more than just a minor addition to the market.

The launch of ETH ETFs could also have ripple effects across the altcoin market. As investors diversify their portfolios to include ETH ETFs, other altcoins could benefit from capital rotation from BTC to the altcoin market.

However, the extent of this impact would depend on the performance of ETH ETFs and their ability to attract a significant share of the market currently dominated by BTC ETFs.

Standard Chartered’s analysis suggests that once spot ETFs are approved, they could attract a large amount of capital, with an estimated investment of 2.39 to 9.15 million ETH in the first year, translating to approximately $15 billion to $45 billion in USD.

If these projections hold true, it indicates a strong interest in Ethereum ETFs, similar to what has been observed with Bitcoin. However, given the current ambiguity, nothing is certain.

Finally, let’s discuss what we can expect next in this evolving situation.

As speculation continues to mount regarding the potential approval of a spot ETH ETF in the U.S. on May 23, VanEck’s ETF has been listed by the Depository Trust and Clearing Corporation (DTCC) under the ticker symbol “ETHV.”

The DTCC, a key player in the American financial market infrastructure, provides clearing, settlement, and transaction reporting services. Listing on the DTCC is a crucial step preceding final approval from the SEC.

While VanEck’s ETF is currently inactive on the DTCC website, indicating that it cannot be processed until regulatory approvals are secured, it is not the first Ether ETF listed by the DTCC. Franklin Templeton’s spot ETH ETF was listed on the platform a month ago.

Standard Chartered suggests that if spot Ether ETFs receive approval this week, Ethereum could keep pace with Bitcoin, with the current 5.4% price ratio potentially remaining stable for the rest of 2024.

However, it’s important to remember that the crypto market remains volatile and subject to regulatory changes. Therefore, it’s crucial to exercise caution and conduct thorough research before making any investment decisions.