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Ethereum (ETH), the second-largest asset by market cap, has surged by 17% following news of a higher success rate for its exchange-traded fund (ETF) to be approved by the U.S. Securities and Exchange Commission (SEC).
On May 20, Ethereum experienced a significant surge, currently trading at $3,658 with a 24-hour market volume of $37 billion. The rise followed after Eric Balchunas, a senior analyst at Bloomberg, raised the odds of Ethereum exchange-traded fund approval from 25% to 75%.
The analyst noted that the U.S. SEC’s quickening pace to approve the ETF might be a result of the agency facing political pressure, as their previous stand demonstrated little involvement with ETF applicants.
Update: @JSeyff and I are increasing our odds of spot Ether ETF approval to 75% (up from 25%), hearing chatter this afternoon that SEC could be doing a 180 on this (increasingly political issue), so now everyone scrambling (like us everyone else assumed they'd be denied). See… https://t.co/gcxgYHz3om
— Eric Balchunas (@EricBalchunas) May 20, 2024
Balchunas also stated that the SEC is apparently urging exchanges such as the NYSE and Nasdaq to revise their filings, though there has been no formal confirmation from the regulator.
Meanwhile, Nate Geraci, co-founder of the ETF Institute and president of the ETF Store, noted that the final decision on the registration requirement for individual funds (S-1) is still pending.
According to Geraci, the SEC could accept the exchange rule amendments (19b-4s) independently from the fund’s registration (S-1), which could potentially be delayed beyond VanEck’s Ethereum spot ETF request deadline of May 23.
The potential delay would provide the regulator more time to evaluate and approve these documents, taking into account the intricacies and risks involved with systems that use Proof-of-Stake (PoS) cryptocurrency.
The SEC has already been looking into whether ether, the Ethereum blockchain’s primary native asset, is a security, opening a formal investigation after the network switched from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) mechanism.
If the SEC determines that ether is a security, the regulatory body may reject the spot ether ETF applications.
Meanwhile, analysts at QCP Capital believe the “resounding lack of interest” in the market, combined with the approval of a spot Ethereum ETF, might provoke a short squeeze, which could “easily” return ETH to its recent highs of March 12, when it was trading at $4,066, as per data from CoinMarketCap.