Why is the current ETH market so bad? What impact will the Ethereum ETF resolution have?
Recently, the market performance of Ethereum (ETH) has been relatively sluggish. One important reason is that the uncertainty surrounding whether the U.S. Securities and Exchange Commission (SEC) will approve the spot Ethereum ETF has increased market tension.
Ethereum ETF Approval Prospects
Currently, the probability that the U.S. Securities and Exchange Commission (SEC) will approve the spot Ethereum ETF by the end of May has risen to 14% from 7% last week. Nevertheless, this probability has steadily declined throughout 2024 and is still at a low level compared to the peak of 76% at the beginning of the year.
The document released by the SEC stated that the agency "is considering reasons for not approving the spot Ethereum ETF." It is worth noting that this document is included in every request for comment on the spot Ethereum ETF, while this provision is not included in all spot Bitcoin ETF filings. This suggests that the SEC may reject the spot Ethereum ETF on the grounds that these ETFs are improperly classified as commodity-based trust stocks because they actually hold securities. Based on the information received in the subpoena, this view may be proven.
Market expectations and possible impact
Most market participants expect the SEC to make a final decision on VanEck's application for a spot Ethereum ETF on May 23, and to reject it with a high probability. However, given that the SEC has previously approved ETFs based on commodity futures, it is difficult for the SEC to reasonably reject these products if the subpoena does not provide new information. It is worth noting that the SEC had already approved an ETF based on ETH commodity futures in October last year.
This approval came after Ethereum transitioned to a proof-of-stake (PoS) mechanism, indicating that the SEC may have abandoned its jurisdiction over the asset and consolidated its status as a commodity. If the underlying asset is deemed a security, then these instruments will be illegal and cannot be traded.
Currently, the poor performance of the Ethereum market is largely due to the huge uncertainty as to whether the SEC will approve the spot Ethereum ETF. If the SEC ultimately approves it, it will have a positive impact on the market and may drive up ETH prices. However, if it is rejected, market sentiment may deteriorate further in the short term. Investors should pay close attention to the SEC's movements and do a good job of risk management.
Being rational and cautious will help you find the best investment opportunities in this volatile market.
