According to GSR, a crypto market maker, the chance of a spot Ethereum ETF getting approval in May has dropped to 20%.
Analyst Brian Rudick stated in a note on Wednesday that they now believe there’s only a 20% likelihood of the SEC approving such an ETF next month.
Drop in Likelihood of Spot Ether ETF Approval
GSR’s previous estimate in January put the likelihood of a spot Ether ETF approval in May at 75%. However, this estimate has now plummeted to just 20%. The significant decrease in probability indicates a shift in expectations regarding the approval of such an ETF by the SEC.
The optimistic outlook in January was attributed to various factors, including Grayscale’s Court of Appeals victory and the approval of Ethereum Futures ETFs in October. These developments contributed to a favorable perception of the regulatory environment surrounding Ethereum-based ETFs.
Analysts also noted similarities between the conditions leading up to the potential approval of a spot ether ETF and those preceding the approval of spot bitcoin ETFs. These similarities, such as the existence of futures-based ETFs and significant correlation between spot and futures markets, bolstered confidence in the possibility of SEC approval. However, recent developments and changing market dynamics have led to a revision of these expectations.
Revised Outlook on Spot Ether ETF Approvals
The GSR analyst has shifted to a more cautious stance regarding the potential approval of spot ether ETFs. Citing minimal engagement from the SEC and reported political pressure against approving additional digital asset ETFs, the analyst believes that approval odds have significantly decreased. Additionally, the SEC’s purported investigation into whether ether qualifies as a security further diminishes the likelihood of approval.
Speculating on the SEC’s approach, the analyst suggests that the regulatory body may aim to avoid turning the approval process into a highly publicized event. This cautious approach could prolong the approval process for spot ether ETFs.
As a result of these factors, the GSR analyst now predicts that the approval process for spot ether ETFs could be considerably delayed. The analyst estimates that approval may not occur until 2025-2026, with the process potentially involving litigation and other legal challenges.
Implications of Ether Staking in ETF Applications
Rudick also highlighted recent developments where ETF issuers have modified their applications to incorporate ether staking. While adding staking yield to an ETF may enhance its appeal, Rudick questioned the rationale behind such amendments, especially given the already uncertain approval prospects.
Speculating on the motives behind these changes, Rudick suggested two possibilities. Firstly, issuers may be attempting to provoke a response from the SEC amid its apparent reluctance to engage with ETF applications. Alternatively, they might be preemptively preparing for a potential rejection in May and laying the groundwork for future staking initiatives.
Regardless of the reasons, Rudick believes that these amendments could further diminish the likelihood of approval in May, adding to the overall uncertainty surrounding the approval process.
Revised Estimates for Spot Ether ETF Approval
Earlier this month, Bloomberg ETF analysts adjusted their outlook on the likelihood of a spot ether ETF being approved in May, lowering their estimate to 30%. This revision marks a significant decrease from their previous estimates. In January, Eric Balchunas projected a 70% chance of approval by May, while his colleague James Seyffart provided a slightly lower estimate of 60-65%.
Seyffart expressed growing pessimism regarding the approval prospects, noting a lack of progress as the deadline approaches. He emphasized the contrasting dynamics between the current situation and the optimism surrounding Bitcoin ETF approval. As the deadline draws nearer, Seyffart highlighted minimal developments, contributing to a diminishing sense of optimism among analysts and market participants alike.
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