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TD Cowen Sees Slim Chances for Spot Ethereum ETF in 2024

TD Cowen anticipates that the approval of a Spot Ethereum ETF is unlikely to happen in the near future. They base this prediction on the belief that SEC Chair Gary Gensler would not see any benefits or positive outcomes from such an approval.

Despite the recent approvals of Bitcoin spot funds, the introduction of an Ethereum spot ETF is considered the next significant milestone in the world of cryptocurrency markets. Nevertheless, analysts led by Jaret Seiberg have expressed their skepticism, suggesting that approval for such an ETF may not occur within the current year.

Their assessment underscores the political aspect of the decision, asserting that there are no perceived advantages for SEC Chair Gary Gensler to endorse a spot Ethereum ETF, especially given the discontent among progressive Democrats regarding the agency’s prior approval of a spot Bitcoin ETF earlier in the same month.

Gensler’s ability to advance his agenda in the upcoming election year would likely depend on securing the support of progressive lawmakers, according to the analysts. This backing becomes particularly crucial if Gensler contemplates a transition to another role, such as Treasury Secretary, as stated in their note.

The analysts maintain their perspective that Gensler is in no rush to greenlight an Ethereum ETF. They believe he seeks more time to assess the performance and impact of recently approved spot Bitcoin ETFs. As a result, they foresee this process taking one to two years, potentially resulting in a decision in late 2025 or early 2026.

TD Cowen also highlighted Gensler’s usual cautious and incremental approach to cryptocurrency regulation. In the wake of the Bitcoin ETF approvals, Gensler emphasized that the decision should not be interpreted as an endorsement of other crypto assets. He made it clear that this decision does not reflect the Commission’s willingness to approve listing standards for crypto asset securities.

Spot Ethereum ETFs Hang in the Balance

The likelihood of swift approval for Ethereum-based spot ETF applications has diminished following the SEC’s decision to delay its verdict on applications submitted by Grayscale Investments and BlackRock. These approvals would introduce a more accessible and regulated means for investing in Ether, which is the second-largest cryptocurrency by market capitalization. Nevertheless, the SEC’s cautious approach is evident in its hesitation.

A significant point of contention centers on the classification of Ether, whether it should be considered a commodity or a security. This classification carries significant implications for its suitability as an underlying asset for an ETF.

Most Expect May Approval for Spot Ethereum ETFs

Currently, there are seven Ethereum-based ETFs awaiting approval, and experts from various institutions are engaging in speculation about when the first approval might happen, or even if it will occur at all.

Mathew McDermott, the head of digital assets at Goldman Sachs, expresses confidence in the likelihood of approvals happening within the next few months. Deutsche Bank’s estimation suggests that the SEC will issue its initial decision on such a fund by May 23.

Eric Balchunas, an ETF Analyst at Bloomberg, goes a step further and projects a 70% probability of a spot Ethereum ETF gaining approval by May. This demonstrates the growing anticipation and interest surrounding the potential approval of these ETFs in the cryptocurrency market.

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