Now that the first spot Bitcoin (BTC) ETF has launched in the U.S., the conversation has shifted to Ethereum (ETH), the second-ranked cryptocurrency by market cap and the token that many analysts believe has the best chance of receiving spot ETF approval.
Much like the spot BTC ETF, there are multiple applications for a spot Ether ETF being evaluated by the Securities and Exchange Commission (SEC), and the final deadline for the regulator to decide on the applications submitted by VanEck, ARK 21Shares, and Hasdex, fall between May 23 and May 30.
BlackRock and Fidelity have also submitted applications, which have a final deadline in the first week of August.
While many have suggested that the SEC will be forced to approve one or all of the applications in May, similar to what they did with the spot BTC ETFs, analysts at JPMorgan and TD Cowen say that is unlikely, and think the odds are around 50%.
According to a report from the Washington Research Group of TD Cowen, the SEC is likely to focus on gaining experience with Bitcoin exchange-traded products (ETPs) before considering approval for Ethereum or other cryptocurrency token ETPs.
They said they anticipate a significant delay in the approval of a spot Ether ETF for this reason – a delay that could extend up to 26 months – citing the upcoming elections in the U.S. as a reason for the extended postponement.
TD Cowen stressed the need for the SEC to gain more experience with how the crypto market operates via the Bitcoin ETP before venturing into more volatile tokens.
According to JPMorgan analysts, led by Nikolaos Panigirtzoglou, there is no more than a 50% chance of approval in May.
The analysts noted that expectations of approval are high because the SEC did not mention Ether in its lawsuits against crypto exchanges for violating securities law, which they assume means the regulator will classify the token as a commodity, a necessary condition for spot ETH ETF approval.
“While we are sympathetic to the above arguments, we are skeptical that the SEC will classify Ether as a commodity as soon as May,” the analysts said in a note to clients on Jan. 18, adding that the chances of approval of a spot Ether ETF by May this year is “not higher than 50%.”
They noted that the ability to stake Ether to earn a reward has complicated the situation and makes the token notably different than Bitcoin, and more likely to be considered a security. While the regulator has avoided mentioning Ether in its lawsuits, it has identified other proof-of-stake (PoS) tokens as securities, which means that ETH could also fall into that category.
“The ongoing lawsuits by the SEC against crypto exchanges offering staking services for proof-of-stake blockchains, including Ethereum, make a spot Ether ETF approval more challenging at least until these lawsuits are resolved,” the report said.
Despite these warnings, crypto traders continue to accumulate ETH in the same way they accumulated BTC as the spot Bitcoin ETF hype started to build, so there is a good chance that Ether's price will rise heading into May.
Data provided by TradingView shows that ETH hit a 20-month high of $2,720 last Friday, shortly after the spot BTC ETFs launched, and continues to trade within a few hundred dollars of that mark.
ETH/USD Chart by TradingView
According to market analyst Justin Bennett, “$2,500 is resistance on the weekly chart, as anticipated, and $2,400 is a must-hold level for bulls.”
