Electoral politics or crypto evolution? Speculation Abounds as SEC Hints at Approval of Ethereum ETFs

Is political pressure influencing the SEC's consideration of Ether spot ETFs and what implications does this have for the crypto community?

ethereum (eth) has been on a bullish streak, trading around $3,760 as of May 22, marking a 28% increase over the past week.

This rise is driven by speculation that the US Securities and Exchange Commission (SEC) could approve the first spot Ether exchange-traded funds (ETFs) this week.

In a surprising turn of events, on May 20, the SEC asked Nasdaq, CBOE, and NYSE to refine their applications to list Ether spot ETFs. The exchanges were ordered to submit their revised applications by the end of Tuesday.

Bloomberg analyst Eric Balchunas noted that several ETF issuers, including Fidelity, VanEck and ARK/21Shares, quickly filed their amended filings.

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These filings, called Form 19b-4, are critical as they inform the SEC of a proposed rule change and are among the documents that need the agency's green light before ethereum spot ETFs can go into effect.

Following this news, the price of Ether rose, jumping as much as 18% on Monday to over $3,830 before settling around $3,700 at the time of writing.

It's important to note that the first round of deadlines for Ether spot ETFs are approaching: VanEck's application is due on May 23 and ARK Invest/21Shares' application is due on May 24.

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The approval of these ETFs would be a huge victory for the crypto industry, and would come as a surprise to many who were expecting a rejection.

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

However, Grayscale Investments' recent court victory, which forced the SEC to approve spot bitcoin ETFs, could influence the decision on Ether ETFs.

However, in addition to the 19b-4 filing, ETF issuers must also obtain S-1 approvals from the SEC. Form S-1 is a registration statement that provides detailed information about the ETF, including its investment objectives, strategies, and risks.

The SEC reviews the S-1 filing to ensure that the ETF meets all regulatory requirements. The approval process for S-1 filings can vary and can take weeks or months. Once S-1 approvals are obtained, the ETF can go live and trade on the market.

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This means that it could be weeks or months before we see S-1 approvals and, consequently, an active ethereum ETF.

What is happening and what are the probabilities?

Speculation suggests the SEC's change of heart could be politically ethereum-etf-pivot-entirely-political-source-says” target=”_blank” rel=””>motivatedpossibly influenced by the upcoming elections.

Former President Donald Trump, who recently voiced pro-crypto sentiments, criticized President Joe Biden's understanding of cryptocurrencies and hinted that cryptocurrency enthusiasts should support him.

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This turn of events has led some to believe that cryptocurrencies have become a campaign issue, particularly as Democrats seek to appeal to young voters, a demographic heavily involved in cryptocurrencies.

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“Democrats desperately need young people to come out and vote for them. And the main positioning, if you look at what Biden is doing from a campaign perspective, is to position himself as a forward-thinking octogenarian,” one source said. ethereum-etf-pivot-entirely-political-source-says” target=”_blank” rel=””>The block.

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Additionally, Ji Kim, legal and policy director at the crypto Council for Innovation, suggested the importance of cryptocurrencies to voters and their potential impact on elections, suggesting that crypto voters could be a key swing voting bloc.

Meanwhile, the SEC's pre-approval of Ether futures ETFs in October 2023, including those from ProShares, VanEck, and Bitwise, could influence its decision on spot Ether ETFs. While approval of futures ETFs may indicate a willingness to consider spot ETFs, each application is evaluated on its merits.

Market analysts and experts have been closely monitoring the situation. Bloomberg ETF analyst Eric Balchunas increased his ethereum Spot ETF approval odds from 25% to 75% after hearing rumors of a possible SEC reversal.

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Geoff Kendrick, head of foreign exchange and digital assets research at Standard Chartered Bank, ethereum-etf-approval” target=”_blank” rel=””>voiced similar confidence, estimating a probability of approval of 80% to 90% this week.

In response to these developments, crypto betting platform Polymarket ethereum-etf-approved-by-may-31?tid=1716396667702″ target=”_blank” rel=””>Mountain range a sudden change in probabilities. Initially assessed at a 10% chance of ETF approval by May 31, the odds shot up to almost 75% within hours and are currently around 69%.

Bettors on the platform could see good returns if approval is gained, with almost a 60% return for a “yes” bet and over 165% for betting against approval.

<h2 class="wp-block-heading" id="could-ethereum-et-fs-put-up-a-fight-for-btc-et-fs”>Could ethereum ETFs Compete with btc ETFs?

The possible launch of eth spot ETFs could significantly impact both btc ETFs and the altcoin market in general.

In just four months since their launch, btc spot ETFs have bitcoin-etf” target=”_blank” rel=””>accumulated an impressive $58 billion in assets under management (AUM), with industry giants like Grayscale and BlackRock leading the way. This success raises questions about how eth ETFs could compete with btc ETFs.

Balchunas compared the situation of Ether ETFs launching after bitcoin ETFs to a concert where Sister Hazel performs after Nirvana.

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This analogy translates into timing and impact, with Nirvana representing the bitcoin ETFs, which were the first and set a high standard. Sister Hazel, which symbolizes Ether ETFs, arrived later and might struggle to match the initial impact.

Despite this analogy, Balchunas predicts that eth ETFs could capture 10% to 15% of the assets currently held by btc ETFs. While btc ETFs may continue to dominate, funds may flow from btc to eth, creating room for eth ETFs to establish a presence in the market.

The ethereum ETF announcement has already had a substantial impact, with a $100 billion move in cryptocurrency market capitalization following the news, suggesting that eth ETFs could be more than just “small potatoes.” ” as Balchunas initially described it.

The launch of eth ETFs could also have a ripple effect on the entire altcoin market. As investors diversify their portfolios to include eth ETFs, other altcoins could benefit from the rotation of capital from btc to the altcoin market.

However, the extent of this impact would depend on the performance of eth ETFs and whether they can attract a large share of the market currently dominated by btc ETFs.

Standard Chartered analysis suggests that once spot ETFs are approved, they could attract a lot of capital. They estimate that in the first year after approval, between 2.39 and 9.15 million eth could be invested, which translates to approximately $15 billion to $45 billion in dollars.

If these projections hold true, it indicates strong interest in ether ETFs, similar to what has been seen with bitcoin. However, at the moment ambiguity prevails and nothing is certain.

What to expect next?

As speculation mounts over the possible approval of a spot eth ETF in the US on May 23, the VanEck ETF has been list by Depository Trust and Clearing Corporation (DTCC) under the symbol “ETHV”.

The DTCC, a key player in the US financial market infrastructure, provides clearing, settlement and transaction reporting services. A listing on the DTCC is a crucial step before final SEC approval.

While the VanEck ETF is currently designated as inactive on the DTCC website, indicating that it cannot be processed until regulatory approvals are obtained, it is not the first Ether ETF to be listed by DTCC. The Franklin Templeton eth spot ETF was listed on the platform a month ago.

Standard Chartered has ethereum-etf-approval” target=”_blank” rel=””>He suggested that if Ether spot ETFs receive approval this week, Ether could keep pace with bitcoin, and the current price ratio of 5.4% could hold for the rest of 2024.

Geoff Kendrick, head of foreign exchange and digital assets research at Standard Chartered Bank, said: “Given that we now see bitcoin reaching the $150,000 level by the end of 2024, this would imply a $8,000 level for Ether.”

However, while the spot approval of Ether ETFs could have positive effects, the cryptocurrency market remains volatile and subject to regulatory changes. You should exercise caution and conduct thorough research before making any investment decisions.