Author: Jack Inabinet, Bankless; Translated by: Wuzhu, Golden Finance
Ready to deny? ETH's relative value to BTC has been hammered in May. Why is Ethereum doing poorly? What will the looming spot Ethereum ETF final decision next week mean for your assets?
The likelihood that the U.S. Securities and Exchange Commission (SEC) will approve a spot Ethereum ETF by the end of May doubled from last week, rising from 7% to 14%, but the probability has steadily declined throughout 2024 and remains depressed compared to the peak of 76% at the beginning of this year.
Prediction market speculators were emboldened by news last Friday that Ark Invest had removed equity from its spot Ethereum ETF application, seemingly indicating that the non-equity application was close to approval. However, participants in the more liquid spot market seemed to view the announcement as insignificant.
While prediction markets’ implied odds of approval have risen slightly, the ETH/BTC ratio fell another 2% this weekend, exacerbating losses seen throughout May; it is now trading below the key 0.05 level and being pressed into 2024 lows.
As Fortune reported in March, shortly after the Ethereum network transitioned to proof-of-stake in September 2022, the U.S. Securities and Exchange Commission (SEC) began subpoenaing cryptocurrency companies to provide information about their dealings with the Ethereum Foundation in hopes of classifying the asset as a security.
Yesterday, Scott Johnsson of Van Buren Capital highlighted that the SEC released a document stating that the agency is “providing notice of the grounds for disapproval that are being considered.”
While this document is included in every request for comment on a spot Ethereum ETF, it is notable that the provision is absent from any spot Bitcoin ETF filings, suggesting that the SEC may reject spot Ethereum ETFs on the grounds that they are improperly filed as commodity-based trust shares because they actually hold securities, as information received from the subpoena may demonstrate.
Despite the SEC’s apparent efforts to classify Ethereum as a security, it’s worth noting that the regulator approved an ETF based on ETH commodity futures last October.
This decision, which comes on the heels of Ethereum’s transition to PoS, suggests that the SEC has relinquished jurisdiction over the asset and solidified its status as a commodity, as the instruments would be illegal (and therefore not tradeable) if the underlying assets were securities.
Market participants overwhelmingly expected the SEC’s first final decision deadline on VanEck’s application on May 23 to result in a rejection of the spot Ethereum ETF; however, given the agency’s prior approval of commodity futures ETFs, it was difficult to see how the SEC could justify not listing these products in the absence of new information provided in the subpoena.
