postponed the decision on options on Ethereum (ETH) ETFs

On Tuesday, the SEC decided to postpone its decision on the requests to issue options on spot Ethereum (ETH) ETFs in the USA to mid-November. 

The postponement is part of the procedure, so it is nothing unusual, also because in these cases the SEC always tends to take as much time as possible to deliberate. 

The options on Ethereum (ETH) spot ETFs and the SEC decision

In May, the SEC approved the requests for the issuance of ETFs on Ethereum (ETH) spot in the USA.

The actual landing on the American stock exchanges of these new products, however, only arrived at the end of July, so it has only been a little over two months that they have been effectively tradable. 

The options on these ETFs, however, are not yet available, but several companies have submitted requests to the SEC to be able to issue them. 

Such options would be useful to investors primarily as a risk hedge. 

An option indeed allows an investor who has bought it to sell or buy at a certain date at a certain predetermined price. For example, if the price were to drop, it is possible to partially protect oneself from losses by simultaneously purchasing put options at a price equal to or higher than the purchase price.

The SEC and the requests from the crypto market 

At this moment it seems unlikely that the SEC will end up rejecting these requests. 

In May, many were expecting a rejection of the ETF on ETH spot, which, however, did not come, perhaps due to orders from above for purely electoral purposes. 

The situation has not changed since then, so it is hypothesized that the SEC is currently inclined to approve bull and bear options on spot crypto ETFs. 

In the document with which it communicated the decision to opt for a postponement, the agency simply says that it was obliged to make a decision within 45 days from the submission of the request, and these 45 days expired on September 26. Since it has the option to extend the useful period to make a decision by another 45 days, it simply decided to postpone it.

However, this in theory should be the only possibility of postponement, because according to the law after 90 days the final decision must arrive. Therefore, this should arrive on November 10. 

The success of spot Ethereum (ETH) ETFs: the SEC postpones those on options

Unfortunately, however, the ETFs on ETH spot on the US exchanges have not achieved great success.

In fact, since they landed on the stock market, they have cumulatively recorded as much as 580 million dollars in outflows. 

The problem is that one of these, ETHE by Grayscale, had already existed for years, but in another form. In its original form, the fund could not easily and quickly liquidate any excess ETH held by the fund as collateral, but by becoming an ETF at the end of July, it was finally able to start doing so. 

Since then, it has liquidated almost 2.9 billion dollars of excess ETH, and only a part of these have been reabsorbed by the other ETFs. 

And so more than two months after the launch of new ETFs on ETH spot, they are still recording a significant overall outflow. 

For the Bitcoin spot ETFs, the overall outflows, due to Grayscale, ended after less than a month from the launch, while for Ethereum the overall balance is still negative after more than two months. 

However, since September 19, there has been only one day of strong outflows, with one day of a substantially neutral balance, two days of a slightly positive balance, and two days of a very positive balance. Therefore, the situation has reversed over the past week, because the scenario of the previous week was practically the opposite. 

The price of ETH

It is not a coincidence that the price of Ethereum from the end of July to today has dropped from $3,100 to $2,600. 

In particular, its price in Bitcoin has dropped significantly, because from 0.05 BTC at the end of July it has fallen to the current 0.04. Often the price trend of altcoins follows that of Bitcoin, while in this case a significant difference has been recorded instead. 

It should be noted, however, that the bulk of Ethereum’s decline occurred in August, with the lowest peak of this period reached on September 6 at $2,200. 

Also regarding the price in BTC, the decline stopped precisely on September 19. Therefore, the trend reversal a week ago on ETFs also generated a trend reversal in the price performance ratio of Ethereum compared to that of Bitcoin, causing it to rise from 0.038 BTC to almost 0.041.