Multiple approval decisions delayed again—Is the rejection of Ethereum spot ETF now a foregone conclusion?
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Multiple approval decisions delayed again—Is the rejection of Ethereum spot ETF now a foregone conclusion?
As of now, the U.S. SEC has not communicated with issuers regarding specific matters about Ethereum ETFs.
Navigating Web3 tides with focused insightsAuthor: Nianqing, ChainCatcher
On March 19 local time, the U.S. Securities and Exchange Commission (SEC) released two notices further delaying decisions on two spot Ethereum ETF applications—extending the decision deadline for the Hashdex Nasdaq ETH ETF to May 30, 2024, and postponing the ruling on the ARK 21Shares Ethereum ETF to May 24, 2024.
In the announcement, the SEC stated: "The Commission finds that additional time for issuing an order approving or disapproving the proposed rule change is appropriate, so that the Commission has sufficient time to consider the proposed rule change and the issues raised therein."
Previously, on March 4, the SEC postponed its decisions on BlackRock’s iShares ETH Trust and Fidelity’s Ethereum ETF applications.
Although this delay was expected, it still impacted market sentiment and price action. According to RootData market data, Ethereum dropped below $3,200, with a daily decline exceeding 10%.
According to Bloomberg ETF analyst James Seyffart via social media, at least three more Ethereum ETF decisions will be delayed over the next two days. VanEck, Ark/21Shares, Hashdex, and Grayscale are all expected to face delays within the next approximately 12 days. He previously noted that all ETF reviews might continue to be postponed until May 23.
He also added: "My cautiously optimistic stance on ETH ETFs over recent months has shifted. We now believe these applications will ultimately be rejected in this round by May 23. The SEC has not yet communicated specific concerns regarding Ethereum with the issuers—completely opposite to the situation last fall during the spot Bitcoin ETF applications."
Over the past few weeks, market optimism surrounding approval of spot Ethereum ETFs has steadily declined. Bloomberg ETF analyst Eric Balchunas recently lowered the probability of a spot Ethereum ETF being approved in May from around 70% to just 30%. Data shows the one-month call-put skew for Ethereum has turned negative, indicating stronger demand for put options. Previously, the 60-day indicator had also tilted toward puts, while the 90-day and 180-day indicators remain positive. In its latest market insights report, QCP Capital explained that investor interest in near-term Ethereum put options may stem from decreasing odds of the SEC approving a spot Ethereum ETF in May.
It is understood that spot Ethereum ETF applications have four review periods (45 days, 45 days, 90 days, and 60 days). Once an institution submits a new ETF application, the SEC lists it on the Federal Register, starting a 240-day review cycle from that date. At each stage, the SEC must respond—approve, reject, or delay. If no decision is made by the first deadline, it moves to the next, continuing until the final deadline when the SEC must issue a definitive ruling. Therefore, May 23—the final deadline for VanEck’s earliest-filed spot Ethereum ETF application—will be a pivotal date, with its outcome directly influencing other pending applications.
Currently, seven entities are applying for Ethereum ETFs: BlackRock, Fidelity, Invesco & Galaxy, Grayscale, VanEck, 21Shares & Ark, and Hashdex. Their respective SEC review deadlines are shown in the table below:
Although Matt Hougan, Bitwise's Head of Global Research, and other sources previously predicted nearly 50% or higher chances of approval for a spot Ethereum ETF in May, compared to already-approved spot Bitcoin ETFs, spot Ethereum ETFs still carry certain “risks.” In public filings, the SEC has questioned: "Do specific characteristics of Ethereum and its ecosystem—including its proof-of-stake consensus mechanism and concentration of control or influence among a small number of individuals or entities—raise unique concerns about Ethereum’s susceptibility to fraud and manipulation?"
As highlighted in BloFin’s recent article, "Should We Prepare for a Rejection of the Spot Ethereum ETF?", the negative implications of the PoS mechanism, along with increased risks of price manipulation and potential securities classification, have significantly reduced the likelihood of approval for a spot ETH ETF compared to spot Bitcoin ETFs.
The recent rally in crypto markets may have inflated expectations for this outcome. This recent pullback serves as a reality check, reminding us to at least prepare for the possibility of a spot Ethereum ETF rejection.
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