The chances of approval for pending spot Ethereum exchange-traded fund (ETF) applications in May seem to be dwindling due to the recent urging from two US Senators for the Securities and Exchange Commission (SEC) to reject other crypto ETF proposals. Senators Jack Reed and Laphonza Butler advised the SEC to tighten its scrutiny of Bitcoin ETFs, expressing concerns about approving additional crypto ETFs beyond Bitcoin. They argued that cryptocurrencies like Ethereum lack sufficient trading volumes and integrity to support related ETPs, raising potential risks for retail investors.
The pessimism surrounding the approval of spot Ethereum ETFs was further exacerbated when Bloomberg analysts significantly lowered the probability of approval to 35%. Eric Balchunas, Bloomberg’s Senior ETF Analyst, suggested that the success of Bitcoin ETFs may have unsettled some politicians, contributing to the negative sentiment towards Ethereum ETFs.
Paul Grewal, the legal chief at Coinbase, highlighted the potential legal conflicts that could arise if the SEC were to decline the pending Ethereum ETF applications. Grewal pointed out that Ethereum and other digital asset commodities have market quality metrics that surpass even the most substantial traded equities. He emphasized that Ethereum’s future and spot market exhibit a high and consistent correlation, enabling effective market surveillance. Grewal argued that a refusal of an Ethereum ETF application would be based on flawed reasoning, considering the solid market performance of Ethereum and similar digital assets.
The struggle for Ethereum ETF approval in the US is facing significant challenges, with Senators expressing concerns about the risks for retail investors and Bloomberg analysts lowering the probability of approval. However, Coinbase’s legal chief argues that Ethereum’s market quality metrics and correlation between future and spot markets make it a strong candidate for an ETF approval. The decision ultimately lies with the SEC, balancing the need to protect investors with the potential for growth and innovation in the cryptocurrency market.