Analysts Remain Bearish On Ether ETF Prospects Despite SEC Meetings

The SEC met with Ether ETF hopefuls, but discussions reportedly lacked meaningful feedback.

By: Samuel Haig Loading...

Analysts Remain Bearish On Ether ETF Prospects Despite SEC Meetings

The U.S. Securities and Exchange Commission has finally initiated meetings with spot Ether ETF applicants, however, analysts remain doubtful that the funds could soon receive regulatory approval.

On April 8, Nate Geraci, co-founder of The ETF Institute, tweeted that the SEC had held meetings with several spot Ether exchange-traded fund applicants regarding their filings. However, a report from Barron’s states the meetings were predominantly one-sided, with the agency failing to give the firms any “critical feedback needed to finalize their products.”

“Wall Street hopes for a quick follow-up to Bitcoin ETFs are fading fast,” Barron’s said, noting that the SEC has until May 23 to deliver a verdict on the pending Ether ETF applications. “At this point in the Bitcoin ETF process, the issuers were already engaged in a robust back-and-forth with agency staff.”

The news comes as analysts and even the executives of Ether ETF applications have turned bearish on the funds’ chance of approval, following bullish expectations amid the debut of spot Bitcoin ETFs in January.

Eric Balchunas, a senior ETF analyst at Bloomberg described the meetings as “interesting,” but said his expectations of approvals next month remain low at 25%. “As we've said, need SEC to give comments on the filing documents… and that still ain't happening, even in person they offering nothing,” Balchunas tweeted.

In January, Balchunas estimated there was a 70% chance the Ether ETFs would be greenlit in May.

Jan Van Eck, the CEO of VanEck, a spot Bitcoin ETF issuer awaiting a verdict on its application for an Ether ETF, is also pessimistic regarding the funds’ prospects due to the lack of communication from the SEC just six weeks out from the agency’s deadline.

Van Eck told CNBC that he expects his firm’s Ether ETF applications will “probably be rejected” in an interview at the Paris Blockchain Week. “The way the legal process goes is the regulators will give you comments on your application, and that happened for weeks and weeks before the bitcoin ETFs — and right now, pins are dropping as far as Ethereum is concerned,” he said.

In January, Pranav Kanade, a portfolio manager at VanEck, pegged the likelihood of the funds receiving approval at 50%.

Jean-Marie Mognetti, the CEO of CoinShares, also told CNBC that it is unlikely an Ether ETF will be approved “this side of the year, " emphasizing uncertainty surrounding the SEC’s view on Proof of Stake assets. While CoinShares, a Bitcoin ETF issuer, has not applied to an Ether fund, Mogentti said his firm is “observing the Ethereum decision very, very closely.”

However, Craig Salm, the chief legal officer of Grayscale, recently argued that onlookers should not be surprised there is scant communication from the SEC on spot Ether ETF applications. Salm argued that the SEC’s feedback to applicants in the run-up to the initial cohort of spot Bitcoin ETFs going live also applies to the prospective Ether funds.

“All of these issues were figured out and are identical when comparing spot Bitcoin to Ethereum ETFs,” Salm tweeted. “The only difference is rather than the ETF holding bitcoin, it holds Ether… I don’t think perceived lack of engagement from regulators should be indicative of one outcome or another.”

On April 8, Defiance ETFs also filed for a 2x leveraged futures ETF with the SEC.

The news comes amid bearish momentum for spot Bitcoin ETFs, with the funds collectively suffering their third heaviest daily outflows on April 8 with $223.8 million amid retracement in the digital asset markets, according to SoSoValue. However, outflows slowed sharply the following day, with just $19.5 million exiting the funds.

On April 8, the SEC also delayed its decision on Bitwise and Intercontinental Exchange’s bids to trade Bitcoin options through a spot ETF until May 29.