The cryptocurrency community has been eagerly awaiting the approval of the first spot Ethereum exchange-traded fund (ETF) in the United States. However, once again, the Securities and Exchange Commission (SEC) has postponed its decision and has left investors and analysts in a state of uncertainty until July at least.
The initial deadline for the SEC to approve or reject the first spot Ethereum ETF application was set for May 23, 2024. This deadline applied specifically to the application filed by investment management firm VanEck, which was closely followed by submissions from ARK 21 and Hashdex.
Also read: What Happens If the SEC Denies Spot Ethereum ETF Applications? The Crypto Community Is Divided?
However, in a recent filing, the SEC has extended the deadline for its decision on the Invesco Galaxy spot Ethereum ETF application to July 5, 2024. This move has sparked concerns and speculation within the crypto community about the fate of the long-awaited spot Ethereum ETF.
“The Commission finds that it is appropriate to designate a longer period within which to issue an order approving or disapproving the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein,” the regulatory agency wrote in a filing published this morning.
It appears that the regulator is exercising caution and due diligence as the approval of such a product could have far-reaching implications for the entire industry.
Renowned ETF Analyst Lowers Odds of Approval to Just 35%
The SEC’s decision to delay its ruling has been met with mixed reactions from investors and analysts. While some remain cautiously optimistic, others have voiced their disappointment and skepticism about the prospects of a spot Ethereum ETF approval in the near future.
Notably, several analysts have lowered their odds for the approval of a spot Ethereum ETF in the wake of the SEC’s recent actions. Bloomberg’s ETF analyst Eric Balchunas, who had previously estimated a 50% chance of approval, has now reduced his odds to a mere 35%.
The approval of a spot Ethereum ETF has been hailed as a crucial milestone for the cryptocurrency industry as it would provide mainstream investors with a regulated and accessible way to gain exposure to the second largest cryptocurrency by market capitalization.
Following the approval of various spot Bitcoin ETFs earlier in 2024, the crypto community had high hopes that this Ethereum-based product would experience the same fate. However, the SEC’s hesitance to approve a spot Ethereum ETF is raising questions about the regulator’s overall view of the broader cryptocurrency market.
Such an approval would be a game-changer for the industry as it would not only legitimize Ethereum as a mainstream asset but may also pave the way for greater institutional adoption and mainstream acceptance of decentralized finance (dApps) – a segment of the crypto world that heavily relies on the Ethereum network to function.
Both Performance and Market Sentiment Are Mixed and Remain Heavily Dependent on the SEC’s Actions
In the days leading up to the SEC’s decision, the price of Ether (ETH) experienced a rollercoaster ride, reflecting the market’s uncertainty and speculation surrounding the potential approval of a spot ETF.
While ETH reached a yearly high on March 11, its price has since declined by over 25% since then, potentially due to growing skepticism regarding the SEC’s decision on these ETF applications.
Despite the recent volatility, a many analysts remains optimistic about Ethereum’s long-term prospects, citing that the growing adoption of the blockchain network and its potential applications in various industries such as decentralized finance (DeFi) and non-fungible tokens (NFTs) provide enough use cases to justify a sustained climb in the following months and years.
“We remain confident that the inherent underlying volatility of crypto as an asset class will drive sustained elevated opportunities in crypto ETFs”, commented the Chief Executive Officer of Virtu Financial, Douglas Cifu, regarding the latest pricing action of some digital assets ahead of the SEC’s decision.
A More Straightforward Regulatory Framework is Needed to Bring Clarity to the Crypto Space
The SEC’s decision to delay its ruling on the spot Ethereum ETF has broader implications for the cryptocurrency industry as a whole. It highlights the ongoing regulatory uncertainty and the challenges faced by the sector in gaining widespread acceptance and mainstream adoption.
While frustrating for investors and enthusiasts, this delay showcases the need for clear and comprehensive regulations that govern the rapidly evolving cryptocurrency landscape and provide a clear framework to companies that keep pouring resources into highly subjective procedures.
It Took the SEC a While to Approve a Spot Bitcoin ETF As Well
Despite the setback, the push for a spot Ethereum ETF is far from over. Firms like VanEck, ARK 21, and Hashdex remain committed to their applications and the crypto community is hopeful that the SEC will eventually recognize the growing demand for such investment products.
While the SEC’s delay is disappointing, it’s important to stay patient and keep the bigger picture in mind. It took some time for the agency to finally give the green light to the BTC spot vehicle.
Also read: Best Bitcoin ETFs — 10 Expert Picks
Hence, it may take them a while to fully gauge the implications of a spot ETH vehicle considering the ramifications that this would have for the overall space due to the intricate relationship that this digital asset has in particular with unregulated segments like DeFi.
The approval of a spot Ethereum ETF is likely not a matter of ‘if’ but ‘when’ and the industry must continue to work towards greater transparency, security, and regulatory compliance.
As the crypto space continues to evolve and mature, the road to mainstream adoption continues to be paved with challenges and setbacks like today’s SEC delay. However, the resilience and determination of the community alongside the tremendous potential of blockchain technology are strong enough to keep pushing the boundaries until regulators finally meet the demands of both retail and institutional investors to fully legitimize these investment products.