SEC Anticipated To Reject Spot Ethereum ETFs In Upcoming Decision, ETH Price Takes 5% Hit
April 25 2024 - 11:00AM
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Over the past 24 hours, Ethereum (ETH), the second-largest
cryptocurrency by market capitalization, has experienced a
significant 5% price drop. This drop comes amid growing speculation
that the highly anticipated Ethereum ETFs will likely be rejected
by the US Securities and Exchange Commission (SEC) in the upcoming
May deadline. US Bitcoin ETF Issuers Brace For SEC’s Expected
Denial According to a recent Reuters report, various US Bitcoin ETF
issuers and firms anticipate the SEC’s denial of their applications
to launch ETFs tied to the price of ETH. These expectations
have been fueled by “discouraging meetings” between the applicants
and the regulatory agency in recent weeks, as disclosed by four
individuals familiar with the matter. Related Reading: Stellar The
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Prominent investment firms such as VanEck, ARK Investment
Management, and seven other issuers have submitted filings with the
SEC to list ETFs that would track the spot price of Ethereum.
As the first in line, VanEck’s and ARK’s applications are subject
to the SEC’s decisions by May 23 and May 24, respectively. The
sources involved in the meetings between Bitcoin ETF issuers and
the SEC have reported that the discussions have been primarily
“one-sided,” with agency staff not engaging in substantive details
about the proposed products. This starkly contrasts the
intensive and detailed discussions between issuers and the agency
before the SEC’s landmark approval of spot Bitcoin ETFs in
January. The issuers argued during the meetings that the
approval of spot Bitcoin ETFs and Ethereum futures-based ETFs by
the SEC in October set a precedent for the spot ETH products. They
also made efforts to address potential regulatory concerns.
Despite their arguments, the report notes that the SEC staff did
not clarify specific concerns or engage in meaningful dialogue,
further indicating a possible denial of the requests. Setback For
Crypto Industry If these expectations materialize, it would be a
setback for the cryptocurrency industry, which had hoped that the
approval of spot Bitcoin ETFs would pave the way for similar
products and contribute to the mainstream adoption of
cryptocurrencies. According to Todd Rosenbluth, head of ETF
analysis at data firm VettaFi, the likely delay in approval or
rejection until later in 2024 or beyond has left the regulatory
landscape uncertain. While some issuers have expressed their
intention to submit additional disclosure paperwork to continue the
conversation with the SEC, the overall sentiment indicates a
growing belief that the applications will be rejected. VanEck CEO
Jan van Eck has already stated that the company’s application will
likely be rejected, while ARK Investment Management has yet to
comment. Rejected Ethereum ETFs Could Spark Potential Court Battles
Several applicants expect the SEC to cite broader issues, such as
the nature and depth of statistical data on the underlying ETH
market, as reasons for their decision in the event of ETF
rejections. Matt Hougan, chief investment officer at Bitwise
Asset Management, which has filed for a spot in Ethereum ETF,
believes that the SEC may require more time to observe Ethereum
futures and gather additional data. Related Reading: Why Is The
Crypto Market Down Today? Key Reasons Explained Industry insiders
further speculate that rejecting Ethereum ETFs could potentially
lead to legal action, with one source suggesting that the courts
may get involved before Ethereum ETFs eventually become a reality.
The anticipated rejection has already influenced the price of
Ethereum, with Hong Fang, president of the crypto exchange OKX,
stating that the cryptocurrency is experiencing downward pressure
as market participants factor in the likelihood of a negative
outcome. Currently, ETH is trading at $3,100, further highlighting
the cryptocurrency’s persistent downtrend over broader time frames.
Over the past fourteen and thirty days, the token has experienced
significant declines of 12% and 14%, respectively. Featured image
from Shutterstock, chart from TradingView.com
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