According to Bloomberg ETF expert Eric Balchunas, Ethereum ETFs have a low probability of being approved in 2024.
Last week, Balchunas significantly downplayed the likelihood that the U.S. Securities and Exchange Commission (SEC) would approve applications to launch an Ethereum spot ETF on the market, as it did with Bitcoin-based funds.
According to estimates from the expert, there is only 30% chance regulator to approve ether-based investment funds. Balchunas said the SEC is not giving the same signals it did during the Bitcoin spot ETF approval process and that the debate over Ethereum-backed funds is not generating comments that motivate him to be bullish.
More recently, the expert indicated that lawmakers have begun asking the SEC to monitor the cryptocurrency industry and to restrict the launch of further investment products that are based on other cryptoassets.
Prejudices against cryptocurrencies
Alexander Grieve, head of government relations at Paradigm, shared from his X account (formerly Twitter), a letter sent to SEC Chairman Gary Gensler, in which Senators Jack Reed and Laphonza Butler ask the regulator to take strong measures to protect investors from the risk posed by cryptocurrencies.
According to the letter, the listing and trading of certain Bitcoin-based investment products has led to volatile investments, which pose significant risks to ordinary Americans. The senators said that, given the potential risk, American investors should be provided with adequate information before participating in these investment products, but that the Financial Industry Regulatory Authority (FINRA) had found that 70% of Bitcoin fund brokers had violated regulations related to fair risk disclosure.
“In some cases, broker communications falsely equated cryptocurrencies with cash; in others, they provided misleading explanations about the risks,” the letter states. Based on this, the senators ask the SEC to thoroughly examine broker and advisor communications related to ETFs and, more precisely, “strictly limit the application of precedents of these approvals” to other requests for exchange-traded funds.
While the senators believe the Bitcoin market has certain weaknesses, they said it is much more established than other cryptocurrencies. They also noted that other cryptocurrencies are unlikely to generate trading volumes that would support the need to approve other spot ETFs.
On this, Balchunas and Grieve indicated that the success of spot Bitcoin ETFs has already begun to generate tension among high-ranking politicians.
The final decision lies with the SEC in May
Grieve believes that Senators Reed and Butler are being overly skeptical of cryptocurrencies, while Balchunas said that the actions of these senators are part of the reasons he and other experts are pessimistic about the chances of Ethereum ETF approval in 2024.
Other experts, such as JPMorgan analyst Nikolaos Panigirtzoglou, believe that Ethereum spot ETFs only have a 50% chance of receiving regulatory approval this year. Jake Chervinsky, chief legal officer at Variant, also believes that investors will not see an Ethereum ETF this year. However, he noted that approval of this investment vehicle would open up an exceptional opportunity to further expand the adoption of ether in the market.
It is worth noting that the US securities regulator has until next May to decide whether or not to approve investment funds based on Ethereum, but that so far the SEC has not given any key signals or indicators that suggest this possibility and that political pressure may affect this decision.
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