- Lack of SEC communication lowers approval chances to 35%, says Bloomberg’s Balchunas, raising concerns.
- Gensler’s perception of Ether as a security adds complexity, posing obstacles to ETF approval.
- November 5th election day crucial; change in leadership could impact Gensler’s role and Ether ETF approval.
Bloomberg ETF analyst Eric Balchunas has expressed growing concerns over the approval prospects of Ethereum exchange-traded funds (ETFs) as the U.S. Securities and Exchange Commission (SEC) maintains radio silence with issuers. With only 73 days left until the final deadline in May, the lack of communication from the SEC has led Balchunas to downgrade the chances of an Ether ETF approval to just 35%.
Balchunas suggests that the SEC’s deliberate silence might be strategic, creating challenges for prospective fund issuers. He emphasizes the importance of SEC comments for issuers to address and potentially revise their applications. Further, making the process lengthy and intricate.
“The SEC has to give comments and the issuers have to work on correcting them. They may have to refile and they might even want to have a couple of meetings — it’s kind of a long process,”
Eric Balchunas
Also sourced “good intel” to suggest that the SEC may be giving the silent treatment to prospective fund issuers on purpose, he added.
SEC Chair Gary Gensler’s view on Ether as a security rather than a commodity. Similar to Bitcoin, is seen as a potential obstacle. Balchunas argues that Gensler may be reluctant to face additional political backlash. This is especially after the approval of Bitcoin ETFs and the SEC’s court loss to Grayscale in August 2023.
“At the end of the day, Gensler thinks Ether is a security. He would not want to approve it unless he thought it to be a commodity like Bitcoin. All of this little stuff adds up.”
Eric Balchunas
A Feeling of Unease: The Reverse of Bitcoin ETF Race
Balchunas notes a distinctive difference in the atmosphere surrounding the Ether ETF approval process.
He perceives the Ether ETF process as a “reverse” compared to the Bitcoin ETF race. While acknowledging his judgment as a personal and intuitive element, he emphasizes its significance despite not being a major factor in calculating approval odds.
Accordingly, it is in comparison to the positive momentum seen in the spot Bitcoin ETF race. While acknowledging this as a personal observation, he emphasizes the importance of gut instinct in shaping his view on the Ether ETF approval odds.
On March 11, Nate Geraci, president of ETF Store, expressed surprise at the SEC’s approval of several ETH futures ETFs in October but not spot products in May. He noted the lack of a clear explanation for this decision, highlighting the peculiar nature of the SEC’s actions.
Alternative Perspectives: ETF Denial as a Positive Development?
Contrary to market expectations, some industry experts, such as Matt Corva from Consensys, see the potential denial of an ETH ETF as a positive development in the long term.
“If ETH goes, they get crushed by their political handlers and they have no arbitrary ground left to battle against other coins — this is a great thing,”
Matt Corva
Corva suggests that such a denial could remove arbitrary grounds for political battles against other cryptocurrencies.
On March 6, Coinbase and Grayscale in discussions with SEC officials regarding a rule change. Which is primarily aimed for launching spot Ether exchange-traded funds (ETFs). Despite optimism in the crypto industry about this meeting signaling positive developments for Ether ETF approval, Balchunas leaned on a “strong” thesis by VB Capital’s Scott Johnsson. It is further emphasizing the potential counterargument.
Balchunas pointed to Tuesday, November 5, the day of the U.S. presidential election, as the next crucial date to observe. He reasoned that changes in leadership, depending on election outcomes, could impact SEC Chair Gensler’s position, influencing the fate of Ether ETFs.
“Even if Biden wins, sometimes they switch up people running things, which means Gensler could move. If Trump wins, that will change a lot, That’s my reasoning behind the election being the day to watch.”
Eric Balchunas
Despite the uncertainties, Balchunas remained confident that the approval of a spot Ether ETF is a matter of “when,” not “if.” He asserted that, over time, regulatory matters would be addressed, leading to eventual approval.
The Election Day Factor
Balchunas highlights November 5th, the U.S. presidential election day, as a crucial date to watch, indicating that a change in leadership could impact Gensler’s role at the SEC.
Despite the uncertainties, Balchunas remains confident that a spot Ether ETF approval is a matter of when, not if. He asserts that approval is likely to happen eventually as the industry evolves and regulatory matters are addressed over time.
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