Spot Ethereum ETFs’ High-Stakes Regulatory Saga: JPM Anticipates Approval As SEC Seeks Public Comments On Proposals

April 8, 2024

The financial community, buoyed by the successful launch of spot Bitcoin ETFs in the U.S. last Fall—a move that led to a whopping $12 billion in net inflows since inception—is now keenly focused on Ethereum.

With the U.S. Securities and Exchange Commission’s (SEC) decision on spot Ethereum ETFs on the horizon, issuers are hopeful for an approval that could potentially eclipse the success of their Bitcoin counterparts. Yet, as the SEC deliberates, the split in industry expectations casts a veil of uncertainty over Ethereum’s fate in the growing ETF market.

JPMorgan’s Outlook

As the financial world speculates on the future of Ethereum ETFs in the U.S., American multinational financial institution JPMorgan weighed in, predicting that the SEC will ultimately endorse spot Ethereum ETFs. According to Nikolaos Panigirtzoglou, JPMorgan’s global market strategist, there’s a toss-up chance of this happening as soon as May, with a 50% likelihood

Panigirtzoglou hints at a possible legal showdown akin to prior disputes with Grayscale and Ripple if approval doesn’t come through. He elaborated, “Eventually, the SEC will approve spot Ethereum ETFs (but not as soon as this May),” signaling a journey fraught with anticipation and potential delays for Ethereum ETF proponents.

SEC Opens Public Commentary

In a parallel development, the SEC solicited public feedback on three spot Ethereum ETF proposals from giants like Grayscale Investments, Fidelity, and Bitwise. This three-week commentary period represents a crucial step in the regulatory journey of these proposals, offering a glimmer of hope to proponents of Ethereum ETFs. The regulator said the public feedback aimed “to solicit comments on the proposed rule change from interested persons.”

Analysts Temper Expectations

Despite the initial optimism buoyed by the SEC’s approval of Bitcoin spot ETFs, sentiment among analysts regarding Ethereum ETFs has cooled. James Seyffart of Bloomberg Intelligence and his colleague Eric Balchunas have both revised their forecasts, citing the SEC’s apparent lack of engagement with issuers on Ethereum-specific details. 

Seyffart, in March, believed a denial is likely in May, a stance that Balchunas echoed, albeit with a slight chance of approval by the deadline. “My cautiously optimistic attitude for ETH ETFs has changed from recent months. We now believe these will ultimately be denied May 23rd for this round,” Seyffart said. “The SEC hasn’t engaged with issuers on Ethereum specifics. Exact opposite of Bitcoin  ETFs this fall,” he added.

His statement aligned with that of another Bloomberg ETF analyst Eric Balchunas, who earlier said they are dropping the percentage of spot ETH ETF approval in May to 35%. “Yeah, our odds of the ETH ETF approval by May deadline are down to 35%. I get all the reasons they SHOULD approve it (and we personally believe they should) but all the signs/sources that were making us bullish 2.5mo out for BTC spot are not there this time. Note: 35% isn’t 0%, still poss, and and long-term we think it will happen,” Balchunas said.

The contrasting views between financial institutions like JPMorgan and market analysts underscore the uncertainty surrounding Ethereum ETFs. The SEC’s call for public comments suggests a deliberate and cautious approach, yet the lack of direct engagement with issuers raises questions about the timeline for potential approval.

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