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- Balchunas predicts a 75% chance of Ethereum ETF approval, leading to 18% price surge in Ether.
- SEC faces political pressure as speculation mounts around potential approval of Ethereum ETF.
The price of Ether (ETH) surged by over 18% on May 20, reaching $3,655, following an optimistic forecast from Eric Balchunas, a senior analyst at Bloomberg. Balchunas stated,
“James Seyffart and I are increasing our odds of spot Ether ETF approval to 75% (up from 25%), hearing chatter this afternoon that SEC could be doing a 180 on this (an increasingly political issue).”
SEC Faces Political Pressure to Approve Ethereum ETF
Balchunas highlighted that the SEC’s previous stance on Ethereum ETFs demonstrated minimal engagement with applicants. However, recent developments suggest that the regulator might reconsider its position due to political pressure. He noted that the SEC reportedly requests exchanges such as the NYSE and Nasdaq to update their filings, although no official confirmation has been provided.
Update: @JSeyff and I are increasing our odds of spot Ether ETF approval to 75% (up from 25%), hearing chatter this afternoon that SEC could be doing a 180 on this (increasingly political issue), so now everyone scrambling (like us everyone else assumed they'd be denied). See… https://t.co/gcxgYHz3om
— Eric Balchunas (@EricBalchunas) May 20, 2024
Nate Geraci, co-founder of the ETF Institute and president of the ETF Store, added that the SEC’s final decision regarding the registration requirement for individual funds (S-1s) is still pending. Geraci explained that the SEC could approve the exchange rule changes (19b-4s) separately from the fund’s registration (S-1).
This potentially delays the final decision beyond the May 23 deadline for VanEck’s Ethereum spot ETF request. This approach allows the SEC additional time to thoroughly review and approve the complex structures involving proof-of-stake (PoS) cryptocurrencies.
SEC decision deadline this week on spot eth ETFs…
SEC must approve both the 19b-4s (exchange rule changes) & S-1s (registration statements) for ETFs to launch.
Technically possible for SEC to approve 19b-4s & then slow play S-1s (esp given reported lack of engagement here).— Nate Geraci (@NateGeraci) May 19, 2024
Impact on the ETH Options Market
The anticipation surrounding the potential approval of a spot Ethereum ETF has significantly influenced the options market. Deribit, the leading derivatives exchange, reported an open interest of $867 million for Ether options expiring on May 24 and $3.22 billion for those expiring on May 31. In contrast, the CME’s monthly ETH options open interest stands at $259 million, with OKX at $229 million.
The call-to-put ratio on Deribit indicates a strong preference for call (buy) options, suggesting that traders are more inclined to purchase these options than put (sell) options. If Ether’s price remains above $3,600 on May 24 at 8:00 am UTC, only $440,000 put options will be exercised. This scenario would render the rights to sell ETH at $3,400 or $3,500 irrelevant, as the market price would be higher.
Conversely, holders of call options up to $3,600 would exercise their rights, securing the price difference. This outcome could result in a substantial $397 million open interest favoring call options if ETH stays above $3,600 at expiry.
Ether and Bitcoin Rally
Following the analysts’ revised outlook, the price of Ether saw a notable jump, reflecting renewed market optimism. Bitcoin (BTC) also experienced gains, rising more than 5% and approaching the $70,000 mark. This parallel movement indicates a broader market response to the anticipated regulatory developments.
Grayscale Ethereum Trust (ETHE), a closed-end fund proposed for conversion into a spot ETF, also benefited from the optimistic forecast. ETHE, which had been trading at a significant discount to its net asset value due to investor skepticism over SEC approval, surged over 23% on Monday. The potential approval of spot Ether ETFs is expected to enhance market accessibility for a broader range of investors, including institutional entities.
