Uncertainty Over Approval of Ethereum ETF by SEC, JP Morgan Analysts Warn

Ether’s Largest Surge Since 2022 Driven By ETF Approval Speculation

Crypto prices soared recently, driven by hopes that US regulators will soon approve exchange-traded funds (ETFs) investing directly in Ether, the second-largest cryptocurrency. This marks a shift from the pessimism seen just a week ago. 

The market enthusiasm surrounding the potential approval of Ether ETFs is reminiscent of the excitement that greeted the launch of similar Bitcoin funds earlier this year. Those funds helped propel Bitcoin to record highs. 

Key Takeaways 

  • Significant Price Surge: Ether jumped nearly 14%, the biggest gain since November 2022. Bitcoin also saw a notable rise.
  • SEC Engagement: The SEC contacted exchanges and potential ETF issuers to update necessary filings, indicating a potential shift towards approval.
  • Approval Process: ETF issuers need SEC approval for 19b-4 filings and S-1 registration statements, with a decision expected by May 23.
  • Market Speculation: Social media and traders are speculating on potential approval, driving market activity.
  • Ether’s Role: Ether is vital for the Ethereum blockchain, which supports decentralized financial services.
  • Increased Approval Odds: Analysts have raised the probability of spot-Ether ETF approval from 25% to 75%.
  • Investor Caution: Some investors remain cautious, expecting slower SEC action despite market anticipation.
  • Background on Bitcoin ETFs: Bitcoin ETFs have seen massive success, accumulating $58.8 billion in assets since their approval.
  • Future of Ether ETFs: Major firms like BlackRock and Fidelity are pushing for Ether ETFs, potentially broadening crypto’s investor base.


Ether and Bitcoin Prices Rise 

On Monday, Ether surged nearly 14%, marking its biggest single-day increase since November 2022. By Tuesday morning in London, Ether was trading at $3,675. Bitcoin also experienced a significant rise, nearing $72,000, just shy of its mid-March all-time high of nearly $74,000. 


Signs of SEC Movement 

The US Securities & Exchange Commission (SEC) has been in contact with at least one exchange and one potential spot-Ether ETF issuer. They were asked to update related 19b-4 filings, according to sources who requested anonymity. This development suggests that the chances of SEC approval may be improving, though approval is not guaranteed. 


ETF Approval Process 

For an ETF to launch, issuers must submit 19b-4 filings and obtain SEC approval for S-1 registration statements. A decision on at least one spot-Ether ETF application is expected by May 23. The SEC has not commented on individual filings. 


Market Reaction and Speculation 

Social media is abuzz with speculation about the potential approval. Chris Newhouse, an analyst at Cumberland Labs, noted that traders are scrambling to position themselves in anticipation of approval, as many had previously dismissed the possibility. 


Importance of Ether 

Ether is the native token of the Ethereum blockchain, a crucial platform for decentralized financial services. The Ethereum network allows investors to trade, borrow, and lend via automated protocols rather than traditional intermediaries. 


Increasing Approval Odds 

On Monday, Bloomberg Intelligence ETF analyst Eric Balchunas and his colleague James Seyffart increased their estimated probability of spot-Ether ETF approval from 25% to 75%. 

Some fund companies had anticipated rejection due to less robust private discussions with the SEC compared to those for spot-Bitcoin ETFs. This information came from sources who wished to remain anonymous. 


Caution Among Investors 

Despite the optimism, some investors remain cautious. Ravi Doshi, head of markets at FalconX, observed that many counterparties on their derivatives desk are skeptical, expecting the SEC to move more slowly than the market anticipates. 


Background on Bitcoin ETFs 

The SEC has been hesitant about crypto, but it approved US spot-Bitcoin ETFs earlier this year following a court reversal in 2023. These products, from firms like BlackRock Inc. and Fidelity Investments, have accumulated $58.8 billion in assets, making them one of the most successful fund categories. 


Ether ETF Applications 

BlackRock and Fidelity are also seeking to launch Ether funds. The digital asset industry views ETFs as a means to expand crypto’s investor base. Bitcoin ETFs have already attracted investments from retail investors, hedge funds, pension funds, and banks.  

Notable buyers include Millennium Management, Steven Cohen’s Point72 Asset Management, and Elliott Investment Management. 

This comprehensive overview highlights the current optimism and underlying caution in the crypto market as investors await SEC decisions on Ether ETFs. 

Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Crypto is not a legal tender and is subject to market risks. Readers are advised to seek expert advice and read offer document(s) along with related important literature on the subject carefully before making any kind of investment whatsoever. Crypto market predictions are speculative and any investment made shall be at the sole cost and risk of the readers.