There’s never a dull moment when it comes to crypto—the industry has even managed to make the Securities and Exchange Commission’s usually humdrum, bureaucratic exchange traded fund (ETF) approval process into what feels like an edge-of-your-seat historic event.
And this week, there’s been a last-minute plot twist. Analysts who have been closely watching the agency evaluate a slew of applications to launch an ETF that tracks ethereum, the second largest cryptocurrency behind bitcoin, just became way more optimistic that the SEC will approve the investment vehicles. Bloomberg analysts shifted their odds of approval from 25% to 75% on Monday.
The price of ethereum shot up 22% Monday on the news, boosting bitcoin along with it. Ethereum has gained 106% in the past 12 months as crypto’s winter has thawed, while bitcoin is up 159% over the past year.
Eric Balchunas, Senior ETF analyst at Bloomberg Intelligence, explained to Brew Markets that their team changed their odds after hearing the SEC was communicating with exchanges about launching the funds. “This is the 11th hour, you can’t get any more late in the game than this,” Balchunas said of the reversal. “This feels like a 180.”
For those of our readers emotionally healthy enough to stay far away from the world of crypto Twitter, let us explain: In January, the SEC approved the first “spot” bitcoin ETFs—10 (now 11) ETFs that are backed by actual bitcoin as opposed to bitcoin futures. The agency greenlit these a decade after the Winklevoss twins (yes, those Winklevoss twins) filed for the first in 2013.
Now, many of the same firms that have spot bitcoin ETFs, including Cathie Wood’s ARK, Grayscale, Fidelity, and BlackRock, are looking to roll out spot ethereum funds. It’s obvious why—these spot crypto ETFs are cash cows. The bitcoin funds collectively brought in nearly $2 billion in the first three days of trading, and now have over $55 billion in assets total.
Yet up until this week, the consensus among most analysts and even issuers themselves was that the proposed ethereum funds were likely going to be denied on May 23, which is the deadline for the SEC to make a decision. Because the SEC wasn’t meeting with issuers and fleshing out the details the way the agency was prior to bitcoin’s approval, the situation looked pessimistic for eager crypto investors.
Balchunas chalked up the game-time reversal to politics. “This is an election issue now,” he said. Presidential candidate Donald Trump recently voiced his support for cryptocurrency. “The Democrats don’t want to be seen as anti-crypto,” Balchunas said.
If the vehicles are approved, it is a legitimizing event for ethereum. “If you’re in a band, ETFs are like getting your music on Spotify and iTunes—ETFs are the digital format of the investing world,” Balchunas said. “So this would be major [for ether].”
Nobody knows for sure what the agency will really do. All eyes—and wallets—will be focused on the Thursday deadline.—LB
