Crypto exchange Coinbase has recently released a report predicting the likelihood of the Securities and Exchange Commission (SEC) approving spot Ethereum exchange-traded funds (ETFs) by the end of this month. According to Coinbase Institutional Research Analyst David Han, the chances of approval stand between 30% to 40%. Han believes that the correlation between CME futures products and spot exchange rates, which led to the approval of spot Bitcoin ETFs, could also play a role in approving spot Ethereum ETFs.
One of the main reasons for Coinbase’s optimism regarding SEC approval is the role of cryptocurrency in US politics. Han suggests that denying spot Ethereum ETFs could cause the SEC to spend political capital, a move that could be deemed risky. The Democratic leadership of the SEC, coupled with the slight preference of crypto owners for Trump over Biden, adds a layer of complexity to the decision-making process. Uniswap founder Hayden Adams views crypto as a Republican rallying point, contrasting with the regulatory approach of the Biden administration.
Han notes that the SEC does not need to approve all spot applications simultaneously. Each spot Ethereum ETF application has a different decision deadline, with VanEck’s application set for May 23 and BlackRock and Fidelity’s applications potentially waiting until August. Han also suggests that a rejection on May 23 could lead to legal action that might reverse the decision. This tactic has been employed before, as evidenced by Grayscale’s lawsuit over the proposed conversion of GBTC affecting the approval of spot Bitcoin ETFs.
The response to Coinbase’s prediction has been mixed, with Bloomberg analyst Eric Balchunas calling the stance contrarian and optimistic. Balchunas views the prediction as a strategic move by Coinbase to garner attention, even if the odds of approval are slim. He acknowledges that his own predictions have been more conservative, with previous estimates putting the approval odds at “slim to none” and “very pessimistic.” Crowd-sourced estimates also reflect similarly low odds for spot Ethereum ETF approvals.
Overall, the decision regarding spot Ethereum ETFs lies in the hands of the SEC, balancing political considerations, market dynamics, and legal implications. Coinbase’s prediction serves as a reminder of the uncertainty and volatility inherent in the cryptocurrency market, where regulatory approval can make or break investor confidence. As the deadline approaches, all eyes will be on the SEC to see how they navigate this complex and rapidly evolving landscape.