Multiple review resolutions have been postponed again, and the rejection of the Ethereum spot ETF seems to be a done deal?
As of now, the SEC has not communicated with issuers regarding the specifics of the Ethereum ETF, which is in stark contrast to the situation during last fall's Bitcoin spot ETF applications.Author: Nianqing, ChainCatcher
On March 19 local time, the U.S. Securities and Exchange Commission (SEC) announced in two notification documents that it has once again postponed the decision dates for two Ethereum spot ETFs, specifically extending the decision time for the Hashdex Nasdaq ETH ETF application to May 30, 2024 and delaying the decision on the ARK 21Shares Ethereum ETF application to May 24, 2024.
In the announcement, the SEC stated: "The Commission believes that designating a longer period to issue 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."
Previous reports indicated that on March 4, the SEC postponed its decision on BlackRock's iShares ETH Trust application and Fidelity's Ethereum ETF application.
Although this delay was anticipated, it still had a certain impact on market sentiment and trends. According to RootData market data, Ethereum fell below $3200, with a daily decline of over 10%.
According to Bloomberg ETF analyst James Seyffart on social media, at least three more Ethereum ETFs will be delayed in the next couple of days, with VanEck, Ark/21Shares, Hashdex, and Grayscale all facing delays in the next approximately 12 days. He previously mentioned that all ETF review decisions might be postponed until May 23.
Additionally, he stated: "My cautious optimism regarding ETH ETFs has changed in recent months. We now believe these applications will ultimately be rejected in this round on May 23. The SEC has not yet communicated with issuers regarding specific matters related to Ethereum, which is in stark contrast to the situation with last fall's Bitcoin spot ETF applications."
In recent weeks, market optimism regarding the approval of Ethereum spot ETF applications has been steadily declining. Bloomberg ETF analyst Eric Balchunas recently lowered the probability of Ethereum spot ETFs being approved in May from about 70% to 30%. Data shows that the one-month skew for Ethereum has turned negative, indicating relatively strong bearish options. Previously, the 60-day indicator for Ethereum also leaned towards bearish options, while the 90-day and 180-day indicators remained positive. QCP Capital explained in its latest market insights article that investor interest in recent Ethereum bearish options may stem from the decreasing likelihood of the SEC approving Ethereum spot ETFs in May.
It is understood that there are four review deadlines for Ethereum spot ETFs (45 days, 45 days, 90 days, and 60 days). Once institutions submit new ETF applications, the SEC will register the applications in the Federal Register, and the 240-day period will start from the date of registration. At each stage, when the deadline arrives, the SEC must respond: approve, deny, or postpone the review. If the first date does not yield a decision, it will be postponed to the second, until it is delayed to the final deadline, at which point the SEC must make a final decision. In other words, the final deadline of May 23 for the earliest VanEck application for the Ethereum spot ETF will be a key date, and the decision will directly affect the outcomes of other applications.
Currently, seven entities are applying for Ethereum ETFs: BlackRock, Fidelity, Invesco & Galaxy, Grayscale, VanEck, 21Shares & Ark, and Hashdex. The approval deadlines for each fund at the SEC are shown in the table below:
Although previous predictions from Bitwise Global Research Director Matt Hougan and other sources suggested that the likelihood of Ethereum spot ETFs being approved in May was close to 50% or even higher, compared to the already listed Bitcoin spot ETFs, Ethereum spot ETFs still carry certain "risks." In public documents, the SEC has stated: "Are there unique concerns that make Ethereum susceptible to fraud and manipulation, given the specific characteristics of Ethereum and its ecosystem, including its proof-of-stake consensus mechanism and the concentration of control or influence among a few individuals or entities?"
As mentioned in BloFin's recent article titled "Should We Prepare for the Rejection of the Ethereum Spot ETF?," the negative impacts of the PoS mechanism, price manipulation risks, and securitization risks have significantly reduced the probability of the spot ETH ETF being approved compared to spot Bitcoin ETFs.
The recent rise in the cryptocurrency market may have raised our expectations for this outcome, and this decline can help us return to a more rational perspective, at least preparing for the possibility of the Ethereum spot ETF being rejected.
