No More Than 50% Chance of Spot Ether ETF Approval By May, JPMorgan Says

JPMorgan analysts have stated that there is no more than a 50% chance of a spot ether exchange-traded fund (ETF) being approved by the Securities and Exchange Commission (SEC) by May. This comes as lawsuits against crypto exchanges offering staking services for proof-of-stake blockchains, including Ethereum, make the approval of such ETFs more challenging until these cases are resolved. While some have argued that the SEC’s decision not to mention ETH in its lawsuit means the cryptocurrency may be classified as a commodity, JPMorgan remains skeptical of this outcome. The approval of a spot bitcoin ETF has led to increased optimism for an ether ETF, but JPMorgan’s analysts believe the chances of approval by May are not higher than 50%.

No More Than 50% Chance of Spot Ether ETF Approval By May, JPMorgan Says

Lawsuits against crypto exchanges offering staking services for proof-of-stake blockchains make approval of a spot ether ETF more challenging

The approval of a spot ether (ETH) exchange-traded fund (ETF) by the Securities and Exchange Commission (SEC) by May is facing challenges due to ongoing lawsuits against crypto exchanges offering staking services for proof-of-stake blockchains. These lawsuits, including those targeting Ethereum, are creating uncertainty and hindering the approval process for a spot ether ETF. The resolution of these legal battles is necessary for a potential approval.

Traders’ optimism about the approval of a spot ether ETF by May

In recent weeks, there has been optimism in the market regarding the approval of a spot ether ETF by May. Traders have been anticipating the approval after the recent surge in the ether price following the approval of a spot bitcoin ETF. Many investors are hopeful that a spot ether ETF will provide them with an opportunity to gain exposure to Ethereum without actually owning the cryptocurrency.

Probability of the SEC approving the ETF by May is no more than 50%

According to JPMorgan, the likelihood of the SEC approving a spot ether ETF by the May 23 deadline is uncertain. The investment bank’s analysts are skeptical about the SEC classifying ether as a commodity by May, which is a necessary condition for spot ETF approval. JPMorgan estimates that the probability of approval by May is no more than 50%, indicating that there are significant challenges to overcome.

Background

The SEC’s deadline for the Ark 21Shares application is May 23

The Securities and Exchange Commission’s deadline for reviewing the Ark 21Shares application for a spot ether ETF is May 23. This application has raised expectations in the market for the approval of a spot ether ETF. The outcome of this review will greatly impact the chances of approval by May.

Ether as a potential candidate for spot ETF approval after the BTC ETF narrative

After the market’s attention was captivated by the narrative of a bitcoin (BTC) exchange-traded fund (ETF), traders have been looking at ether as the next likely candidate for a spot ETF approval in the United States. The success of a bitcoin ETF has sparked optimism that an ether ETF could receive similar approval, enabling investors to gain exposure to the Ethereum token.

Discount to net asset value (NAV) for the Grayscale Ethereum Trust (ETHE)

The discount to net asset value (NAV) for the Grayscale Ethereum Trust (ETHE) has been contracting since the summer, and it has remained around 12% over the last two months. This contraction suggests that traders have been anticipating the approval of a spot ether ETF, leading to increased demand for ether.

Arguments regarding the classification of ether as a commodity

There have been arguments regarding the classification of ether as a commodity, which is a necessary condition for the approval of a spot ETF. Some argue that the SEC not mentioning ether in its lawsuit against crypto exchanges indicates that it will likely classify ether as a commodity in the coming months. Others contend that the approval of ether futures-based ETFs implies that ether is already deemed to be a commodity.

Approval of ether futures-based ETFs in September 2023

In September 2023, ether futures-based ETFs received approval, indicating that ether could be considered as a commodity. This approval raised hopes for the subsequent approval of a spot ether ETF. However, JPMorgan’s analysts remain skeptical about the SEC classifying ether as a commodity by May.

JPMorgan’s Analysis

Skepticism about the SEC classifying ether as a commodity by May

JPMorgan’s analysts, led by Nikolaos Panigirtzoglou, express skepticism about the SEC classifying ether as a commodity by May. While they acknowledge the arguments pointing towards such a classification, they believe that the SEC is unlikely to make this determination in such a short timeframe.

Chances of approval of a spot ether ETF by May are not higher than 50%

Based on their analysis, JPMorgan’s analysts estimate that the chances of approval for a spot ether ETF by May are not higher than 50%. This assessment highlights the challenges and uncertainties surrounding the approval process and indicates that the road to approval is not guaranteed.

Impact of Ethereum’s transition to proof-of-stake on decentralization

The transition of Ethereum from the proof-of-work to the proof-of-stake consensus mechanism has had an impact on the decentralization of the blockchain. This shift has made ether more similar to other altcoins outside of bitcoin, which have been classified as securities by the SEC. The implications of this transition on the approval of a spot ether ETF are still uncertain.

Challenges to Approval

Ongoing lawsuits by the SEC against crypto exchanges offering staking services for proof-of-stake blockchains

One of the major challenges to the approval of a spot ether ETF is the ongoing lawsuits by the SEC against crypto exchanges that offer staking services for proof-of-stake blockchains, including Ethereum. These lawsuits create regulatory uncertainty and raise questions about the compliance and legality of staking services.

Impact of lawsuits on the approval of a spot ether ETF

The lawsuits against crypto exchanges offering staking services for proof-of-stake blockchains have a direct impact on the approval of a spot ether ETF. Until these lawsuits are resolved and regulatory clarity is established, it will be challenging for the SEC to approve an ETF that includes Ethereum.

Resolution of lawsuits as a necessary condition for approval

The resolution of the ongoing lawsuits is a necessary condition for the approval of a spot ether ETF. It is important for these legal battles to be settled in order to provide a clear regulatory framework for crypto exchanges offering staking services and pave the way for the approval of a spot ether ETF.

Market Impact

Surge in ETH price following the approval of a spot bitcoin ETF

The recent approval of a spot bitcoin ETF has led to a surge in the price of ether. Traders and investors have been speculating that a similar approval for an ether ETF could have a positive impact on the price of Ethereum. The market is closely monitoring developments regarding the approval of a spot ether ETF as it has the potential to influence the overall cryptocurrency market.

Potential for professional investors to gain exposure to Ethereum through an ETF

The approval of a spot ether ETF would provide professional investors with a regulated and accessible avenue to gain exposure to Ethereum. This would enable investors to participate in the growing Ethereum ecosystem without the need to directly own and manage the cryptocurrency.

Comparison of ether to other altcoins outside of bitcoin

The transition of Ethereum to the proof-of-stake mechanism has made ether more similar to other altcoins outside of bitcoin. These altcoins have been classified as securities by the SEC. The classification of ether as a commodity or security will have implications for its approval as an ETF and its positioning in the broader cryptocurrency market.

Conclusion

The likelihood of a spot ether ETF being approved by May is uncertain. The ongoing lawsuits against crypto exchanges offering staking services for proof-of-stake blockchains, including Ethereum, pose significant challenges to the approval process. JPMorgan’s analysis indicates that the probability of approval by May is no more than 50%, emphasizing the uncertainties and obstacles associated with the approval of a spot ether ETF.

The resolution of the ongoing legal battles is crucial for potential approval. Clear regulatory guidelines and compliance standards need to be established to ensure the legitimacy and legality of staking services. The market continues to closely monitor the developments surrounding the spot ether ETF approval process, as it has the potential to impact the broader cryptocurrency ecosystem.

References

CoinDesk Bullish group Block.one CoinDesk’s finance reporter, Will Canny