JPMorgan: Less Than 50% Chance of Spot Ethereum ETF Approval

With the recent approval of a spot Bitcoin ETF by the U.S. Securities and Exchange Commission (SEC), the focus in the crypto space has shifted to a spot Ethereum ETF. However, JPMorgan analysts led by Nikolaos Panigirtzoglou are not optimistic about the SEC's approval of a spot Ethereum ETF. The analysts attribute their cautious stance to regulatory and legal considerations, estimating the probability of approval to be no higher than 50%.

"While we understand the arguments, we doubt that the SEC will classify Ethereum as a commodity before May," the JPMorgan analysts said.

In the meantime, the SEC recently delayed its decision on Fidelity's spot Ethereum ETF, extending the deadline to March 5, 2024, for further assessment. Additionally, final decisions on other spot Ethereum ETF applications from the SEC are expected between late January 2024 and August.

The JPMorgan analysts emphasize that the SEC's classification of Ethereum—whether as a commodity or a security—will play a pivotal role in determining the fate of a spot Ethereum ETF.

January 25th marks the SEC's deadline for deciding on Grayscale's spot Ethereum ETF application. Grayscale, which previously overturned the SEC's denial of its Bitcoin ETF, is now seeking approval for a spot Ethereum ETF. Grayscale's prior legal victory could influence the SEC's decision.

While the SEC's recent approval of a spot Bitcoin ETF might suggest a positive shift, SEC Chair Gary Gensler's public statements that the agency neither approves nor disapproves of Bitcoin cast a shadow over the approval prospects of a spot Ethereum ETF.

Moreover, following the SEC's approval of the spot Bitcoin ETF, Bitcoin has declined by over 20% since hitting a three-year high of $49,000 on January 11th. JPMorgan analyst Kenneth Worthington opines that the waning enthusiasm for crypto ETFs is likely to persist, leading to lower token prices, reduced trading volumes, and fewer ancillary revenue opportunities for firms like Coinbase (COIN.US).