Regulation
Coinbase expects 30%-40% chance of ETH ETF spot approval by end of month
Crypto exchange Coinbase believes in the chances that the SEC will approve the spot Ethereum ETFs at the end of the month are between 30% and 40%.
In a May 15 report, David Han, institutional research analyst at Coinbase, claimed that the main factor that led the SEC to approve spot Bitcoin ETFs – the correlation between CME futures products and spot exchange rates – could also lead to approving spot Ethereum ETFs.
Han said there was “room for upside surprise regarding this move,” both in prediction markets and in the fact that Grayscale Ethereum Trust is trading at a 24% discount.
He admitted that the SEC’s silence had caused “uncertainty” and that spot ETH ETFs that specifically aim to engage in ETH staking were unlikely to be approved.
Politics, a possible factor
Coinbase is bullish in part because of crypto’s key role in U.S. politics. Han said the SEC would be spending political capital by disallowing spot ETH ETFs, a strategy that Coinbase says is uncertain.
Bankless founder Ryan Sean Adams echoed the sentiment, saying approval expectations were low until Democrats “realized that their anti-crypto SEC chairman could lose them an election.” .
Neither individual described any specific political developments. However, recent investigations CA watch crypto owners slightly prefer Trump over Biden. Hayden Adams, founder of Uniswap described crypto as a Republican rallying point in contrast to the Biden administration’s regulatory approach.
SEC Chairman Gensler and two other voting commissioners are Democrats, while two other voting commissioners are Republicans, giving the agency both Democratic leadership and a majority.
Approval could be delayed
Han noted that the SEC does not need to approve all one-time requests at once.
Each ETH ETF spot request has a different decision time. The SEC must first rule on VanEck’s request by May 23, but can rule on BlackRock and Fidelity’s requests until August.
Han also argued that a May 23 rejection could lead to legal action that would overturn the decision.
In January, SEC Chairman Gary Gensler cited a Grayscale lawsuit over the GBTC conversion project as one of the factors in the agency’s approval of spot Bitcoin ETFs. However, Grayscale has not stated that it will take similar legal action regarding spot ETH ETFs.
Bloomberg’s Balchunas responds
Bloomberg Analyst Eric Balchunas commented on Coinbase’s maverick and optimistic stance, writing:
“It’s like a way to get out of the option of buying money to gain notoriety if by chance that happens. No harm if they’re wrong. Risk-free public relations approach.
He concluded that the predictions of himself and his colleagues are “bravier and more reputationally risky than… [last minute random] counter-current calls.
Balchunas issued a low estimate on May 14, when he said the chances of one-time ETH ETF approvals were “slim to none.” At the end of March, he predicted a “very pessimistic” approval probability of 25%.
Crowdsourced estimates provide similarly low odds. At the time of writing, Polymarket’s chances of approval were 10%, compared to 16% at the time of Coinbase’s report.