Ethereum
Will Ethereum ETFs be approved on Thursday? Here’s What This Crypto Prediction Market Tells Us
Will Ethereum ETFs be approved on Thursday? Here’s What This Crypto Prediction Market Tells Us
In a crazy series of events, hopes for a place in the Ethereum ETF appeared seemingly out of nowhere. On the afternoon of May 20, Bloomberg ETF analyst Eric Balchunas posted on, noting that he is increasing his chances of approval of the Ethereum spot ETF from 25% to 75% after “hearing talk this afternoon that the SEC may do a 180.” The price of Ethereum soared almost instantly, going from under $3,100 to over $3,800 in less than 24 hours.
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Balchunas believes the ETFs have a strong chance of being at least partially approved by Thursday, the final date for the VanEck ETF application. According to Balchunas, it is possible that the SEC will approve 19b-4 filings, which would allow ETFs to be listed on exchanges. However, ETFs would also need S-1 approval, a detailed registration document for each ETF. This move, according to Balchunas, would allow the SEC to get the ball rolling on ETFs while still having time to conduct due diligence on each ETF application before making a final decision.
However, Balchunas is only a single opinion. While he is a knowledgeable insider and likely has real information to support his position, it is also important to consider what others think about the likelihood of an ETH ETF this week.
Polymarket is a unique crypto app. The site allows anyone to bet on the outcome of events using crypto. Events have a “yes or no” outcome, and users can bet on “yes” or “no”. The potential payout is proportional to the assumed probability of the outcome. Thus, if most market participants believe that the event is likely to occur, the payoff for betting on “yes” will be much lower than that for betting on “no”. It works similar to sports betting: events with fewer chances of winning pay more and payouts scale as bettors make their choice.
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The site hosts various events to bet on, such as the upcoming presidential election, several Elon Musk tweets in a week, and how many weeks in a row Taylor Swift’s album will be #1.
The site attracts hundreds of millions of bets, including a bet on whether Ethereum ETFs will be approved by May 31. Before Balchunas’ announcement, the site predicted a 10% chance of ETF approval by May 31. the odds jumped to nearly 75% within hours. Odds are currently around 70%, meaning punters could win almost 50% if the event happens. On the other hand, betting against ETF approval would generate net returns in excess of 200%.
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The rules of the bet state that it “will be resolved ‘Yes’ if a spot Ethereum ETF receives SEC approval before May 31, 2024, 11:59:59 p.m. ET.” Otherwise, this market will answer “No”. “This language is somewhat unclear because, as noted above, the endorsements may not be as clear as those governed by the rules. Regardless, the bet is extremely interesting to watch, as it helps understand how retailers and other market participants assess the possibility of ETH ETFs by the end of the week.
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