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Cryptocurrency market maker GSR revised its forecast for the approval of a spot Ethereum ETF in May, reducing the probability to just 20%. That's a significant drop from the firm's estimate in January, which put the chance at 75%.
“We now believe there is a 20% chance that the SEC will approve a spot Ethereum ETF in May,” GSR analyst Brian Rudick explained the revised forecast in a note published today. According to GSR Research Analyst Matt Kunke, the previous optimistic outlook was attributed to Grayscale's Court of Appeals victory and the approval of Ethereum Futures ETFs in October.
Rudick noted that the conditions leading to the potential approval of the spot Ethereum ETF are similar to those leading up to the approval of spot Bitcoin ETFs. These included the existence of a futures-based ETF and a significant correlation between the spot and futures markets.
However, Rudick has now taken a more conservative view on the potential for spot ETH ETF approvals. He cited minimal interest from the SEC, political pressure against approving additional digital asset ETFs, and an alleged SEC investigation into whether ETH is a security as factors reducing the likelihood of approval.
Rudick now predicts that the approval process for spot Ethereum ETFs could take much longer than previously anticipated. “Our best guess is that the process will take much longer and will likely involve litigation, and we now believe spot Ethereum ETFs will likely be approved in 2025-2026,” he added.
Rudick also noted that, surprisingly, several applicant companies have recently amended their ETF applications to include ETH staking. While an ETF with staking returns is likely more attractive than one without one, Rudick questioned why companies would complicate the approval process, which already appears weak.
Rudick speculated that this could be an attempt by companies to get a response from an unresponsive SEC, or perhaps an admission of defeat in May and lay the groundwork for a future staking feature. “Both of these reasons, if true, point to lower approval ratings for May,” he said.
*This is not investment advice.