Ethereum ETF Approval 70% by May: Will the SEC Give the Green Light or Hit the Brakes?

• The SEC’s stance on approving spot Ethereum ETFs is uncertain, with internal resistance and varying expert opinions.

• Commissioner Hester Peirce calls for a more straightforward approval process, while asset managers remain optimistic about Ethereum ETFs.

The approval of spot Ethereum Exchange-Traded Funds (ETFs) in the United States has become a focal point for the crypto community and investors. However, as of January 23, 2024, FOX Business reporter Eleanor Terrett reported a range of expectations regarding the SEC’s stance in a post on X. 

Reporting on the timeline for a potential $ETH ETF approval has turned up a plethora of different takes from ETF issuers, investment management firms and sources close to the @SECGov.

One $BTC Spot ETF issuer with an ETH Spot ETF application says they’re confident the…

— Eleanor Terrett (@EleanorTerrett) January 23, 2024

Eleanor Terrett’s report reveals that the U.S. Securities and Exchange Commission (SEC) currently harbors reservations about approving a spot Ethereum ETF. While the source of this information remains undisclosed, Terrett’s report suggests internal resistance within the SEC. The exact nature of this resistance and its origins remain unclear, leaving room for speculation within the crypto community.

Notably, SEC Commissioner Hester Peirce, known for her pro-cryptocurrency stance, has advocated a more straightforward decision process. She critiques the SEC’s tendency to rely on legal victories, exemplified by Grayscale’s spot Bitcoin ETF approval. Peirce believes ETF approvals should involve “regular way consideration” rather than being swayed by court cases’ compelling action. Her stance underscores the need for a well-defined regulatory framework in the cryptocurrency ETF approval process.

Asset Managers Remain Optimistic

While resistance within the SEC raises questions, asset managers responsible for issuing Ethereum ETFs maintain a sense of optimism. One issuer of an Ethereum Spot ETF application expressed confidence in both approval and a smooth launch, citing the successful approval of Bitcoin spot ETFs as a precedent. Another unnamed issuer even anticipates the launch of a spot Ethereum ETF by the end of summer, attributing this expectation to the SEC’s earlier approval of Ethereum futures ETFs and BlackRock’s strong ETF track record.

The crypto community and financial experts have differing opinions on the likelihood of spot Ethereum ETF approvals. Bloomberg ETF analyst Eric Balchunas offers a bullish estimate, positing a 70% chance of approval in May. Conversely, JP Morgan executive Nikolaos Panigirtzoglou predicts a more conservative 50% chance of approval. Meanwhile, Polymarket odds suggest a moderate 53% chance of approval.

Bloomberg ETF analyst Eric Balchunas said he expects a 70% chance of an Ethereum spot ETF being approved in May. The SEC needs to make approval decisions on multiple Ethereum spot ETF applications by the end of May, including VanEck, Ark 21Shares and Hashdex. Digital asset lawyer…

— Wu Blockchain (@WuBlockchain) January 11, 2024

Peirce has indicated that the SEC intends to modify its approach to Ethereum ETF applicants based on lessons learned from the Bitcoin ETF saga. The regulatory body aims to shift towards considering regular market and consumer factors in its decision-making process rather than relying on legal actions to trigger approvals. This change signals a potential shift away from the current adversarial approach.

X Account Hack and Regulatory Hype

Peirce also drew attention to the SEC’s recent X account hack, which led to a brief market manipulation due to a fake approval post. She believes such incidents might have been avoided if the SEC had not generated excessive attention around ETF approvals. Her assertion implies that regulatory agencies should avoid building undue anticipation around their decisions, emphasizing the importance of maintaining a measured approach.

The SEC’s decision to delay the approval of Fidelity’s Ethereum Spot ETF until March 5, 2024, has extended the evaluation period. Consequently, the final verdict on the spot Ethereum ETFs is expected between late January and August 2024. The ongoing uncertainties, coupled with varying signals from the SEC and public expectations, contribute to the cloudy outlook surrounding the approval of spot Ethereum ETFs.