Cryptocurrency exchange Coinbase believes there is a 30% to 40% chance that the U.S. Securities and Exchange Commission (SEC) will approve a spot Ethereum ETF by the end of the month.

In a May 15 report, David Han, an institutional research analyst at Coinbase, suggested that one of the key factors for the U.S. Securities and Exchange Commission (SEC) to approve a spot Bitcoin ETF was the correlation between the Chicago Mercantile Exchange (CME) futures product and spot trading prices. He believes that this correlation may also have prompted the SEC to approve a spot Ethereum ETF.

Coinbase analyst David Han believes that the prediction market movement and Grayscale Ethereum Trust’s 24% trading discount provide additional positive signals for the approval of the spot Ethereum ETF, suggesting that even amid uncertainty, there is potential reason for optimism in the market, which could bring unexpected upside to the approval of the ETH ETF.

At the same time, David Han admitted that the SEC’s silence on the approval of spot Ethereum ETFs has led to market uncertainty, and he pointed out that spot ETH ETFs specifically designed to participate in the Ethereum staking mechanism have a lower chance of approval.

Politics may be a factor

Coinbase’s optimism is partly due to the key role of cryptocurrency in U.S. politics. Han said the SEC’s rejection of a spot ETH ETF would cost valuable political capital, which is seen as a risky strategy.

Bankless founder Ryan Sean Adams expressed the same view, saying that his expectations for the approval of the spot Ethereum ETF (ETH ETF) were low until the Democrats realized that their opposition to cryptocurrency holdings and the anti-crypto attitude of the SEC chairman could negatively affect their electoral prospects.

Although the two commentators did not provide detailed political information. However, according to a recent survey, cryptocurrency holders seem to be more inclined to support Trump than Biden in terms of political stance. Hayden Adams, founder of Uniswap, believes that the cryptocurrency community is politically closer to the values ​​of the Republican Party, which contrasts with the relatively strict regulatory policies of the Biden administration.

The SEC's decision-making body consists of four voting commissioners, three of whom are Democrats, including Chairman Gary Gensler, and one of whom is a Republican. This composition ensures that the SEC can balance the perspectives and interests of both parties when handling matters.

Approval may be delayed

Han noted that the SEC does not need to approve all spot applications at once.

Each spot ETH ETF application has a different decision deadline. The SEC must decide on VanEck’s application by May 23, but can delay until August to decide on BlackRock and Fidelity’s applications.

Han also believes the May 23 rejection could lead to legal action to overturn the decision.

In January, SEC Chairman Gary Gensler cited Grayscale’s lawsuit regarding the proposed conversion of GBTC into a spot Bitcoin ETF as a factor in the agency’s approval of a spot Bitcoin ETF. However, Grayscale has not indicated that it will file a similar lawsuit around a spot ETH ETF.

Bloomberg's Balchunas responds

Bloomberg analyst Eric Balchunas commented on Coinbase’s optimistic stance on the approval of its spot Ethereum ETF, saying:

“This position of Coinbase is akin to holding a call option far from the strike price, which, if the prediction comes true, will greatly boost Coinbase’s visibility and reputation. If they are wrong, even if Coinbase’s predictions turn out to be wrong, it will not cause substantial harm to the company, so it is a risk-free PR strategy.”

Eric Balchunas concluded in his commentary that the forecasts made by himself and his colleagues are "braver and riskier" compared to the contrarian and optimistic stance of Coinbase. This comparison shows that while Coinbase's forecasts may be seen as a PR strategy, Balchunas and his team take a more cautious and in-depth analysis-based approach.

Eric Balchunas gave a relatively pessimistic forecast on May 14, saying that the chances of the spot Ethereum ETF (ETH ETF) being approved were very small, describing it as "minimal". In late March, his forecast was slightly more optimistic, when he thought the chances of approval were "very pessimistic" at 25%. This adjustment in the forecast may reflect changes in market sentiment, the regulatory environment, or his personal further analysis and interpretation of relevant information.

Through prediction market platforms like Polymarket, users have the opportunity to place investment bets on whether a spot Ethereum ETF (ETH ETF) will be approved. Such betting behavior is aggregated to form a collective prediction of the possible outcome of this event. As of the time of writing, the probability of approval of the spot ETH ETF on the Polymarket platform is shown as 10%, which is a decrease from 16% when Coinbase published its report. This decrease in probability reflects that the market's expectations for the approval of the spot ETH ETF are decreasing over time, suggesting that investors and market participants have a more cautious or even pessimistic view on whether this financial product can be approved by regulators in the short term.

Conclusion:

As Coinbase is relatively optimistic about the approval of the spot Ethereum ETF (ETH ETF), the market's attention to this event continues to heat up. Despite the uncertainty caused by political factors and the silence of the SEC, the cryptocurrency community still has expectations for positive changes in the regulatory environment. Eric Balchunas' pessimistic prediction is in sharp contrast to Coinbase's optimistic stance, which reflects the market's divergent views on the possibility of approval of such financial products.

The SEC’s decision-making process and membership, as well as data from prediction markets such as Polymarket, provide different perspectives and information to market participants. As different predictions and analyses emerge, market sentiment and expectations are constantly evolving.

Ultimately, regardless of the SEC's decision, this process highlights the interaction between the cryptocurrency industry and regulators, and how political, market, and technological factors will work together to shape the future of this emerging field. For investors and market observers, keeping a close eye on regulatory developments, market reactions, and industry trends will be key to making informed decisions in the ever-changing cryptocurrency space. #Coinbase #ETHETF #市场预期