Following recent news of a potential increase in the approval rate for an Ethereum exchange-traded fund (ETF) by the U.S. Securities and Exchange Commission (SEC), Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has seen a remarkable surge of 17%.
On May 20, Ethereum experienced a substantial increase, currently valued at $3,658 with a daily trading volume of $37 billion. This surge came after Eric Balchunas, a senior analyst at Bloomberg, raised the probability of an Ethereum ETF approval from 25% to 75%.
Balchunas suggested that the SEC’s accelerated pace in considering the ETF approval may be a response to political pressure, as their previous stance showed limited engagement with ETF applicants. He also mentioned that the SEC is allegedly encouraging exchanges like NYSE and Nasdaq to amend their applications, although there has been no official confirmation from the regulator.
Meanwhile, Nate Geraci, co-founder of the ETF Institute and president of the ETF Store, highlighted that the final decision on the registration requirement for individual funds (S-1) is still pending. Geraci explained that the SEC could potentially approve the exchange rule amendments (19b-4s) separately from the fund’s registration (S-1), which could lead to a delay beyond the deadline for VanEck’s Ethereum spot ETF request on May 23.
A potential delay could give the SEC more time to carefully evaluate and approve the documents, considering the complexities and risks associated with systems utilizing Proof-of-Stake (PoS) cryptocurrency. The SEC has been investigating whether ether, the primary native asset of the Ethereum blockchain, qualifies as a security, especially after the network transitioned from a proof-of-work (PoW) to a proof-of-stake (PoS) consensus mechanism.
If the SEC determines that ether is a security, it could potentially reject the spot ether ETF applications. Despite this, analysts at QCP Capital believe that the combination of low market interest and the approval of a spot Ethereum ETF could trigger a short squeeze, potentially driving ETH back to its recent highs on March 12 when it was valued at $4,066, according to CoinMarketCap data.
In related news, ARK and 21Shares have recently removed the staking feature from their Ethereum ETF plans, signaling a potential shift in their strategies.