JPMorgan Expresses Caution and Skepticism on Spot Ether ETF Approval

• Analysts are assessing the likelihood of a spot Ethereum ETF approval, with expectations pointing towards a possible arrival in May 2024.
• JPMorgan analysts express skepticism stating that the Securities and Exchange Commission (SEC) is unlikely to classify Ethereum as a commodity by May.

Amid the approval of the spot Bitcoin ETF last week, there’s been growing chatter around a similar investment product launch for Ethereum. Analysts are weighing the odds of approval for a spot Ethereum ETF this year with many predicting that this might arrive in May 2024.

Recent market optimism surrounding the potential approval of a spot Ether (ETH) exchange-traded fund (ETF) by May 23, the Securities and Exchange Commission’s (SEC) deadline for the Ark 21Shares application, has been met with caution from JPMorgan (JPM). According to the investment bank, the likelihood of the SEC granting approval for the ETF by May is likely to be no more than 50%.

With the narrative of a Bitcoin (BTC) ETF dominating the market last year, attention has shifted towards Ether as the next probable candidate for a spot ETF approval in the United States. JPMorgan notes that the sentiment reflects in the discount to net asset value (NAV) for the Grayscale Ethereum Trust (ETHE), which has been contracting since the summer, hovering around 12% over the last two months.

JPMorgan Analysts Express Skepticism Over Spot Ether ETF

The investment bank acknowledges arguments suggesting that the SEC’s decision not to include ETH in its lawsuit against crypto exchanges for violating securities law may indicate an impending classification of the cryptocurrency as a commodity. Some have also pointed to the approval of Ether futures-based ETFs in September last year as a sign of the cryptocurrency being deemed a commodity.

However, JPMorgan’s analysts, led by Nikolaos Panigirtzoglou, express skepticism. In a note to clients on January 18, the analysts stated, “While we are sympathetic to the above arguments, we are skeptical that the SEC will classify Ether as a commodity as soon as May.” They add that the chances of a spot Ether ETF gaining approval by May this year are “not higher than 50%.”

In the wake of the recent approval of a spot Bitcoin ETF, Ethereum (ETH) has experienced a notable surge as traders speculate on the potential approval of an Ether exchange-traded fund (ETF). If granted, this approval would mark a significant milestone, allowing professional investors in the United States to gain exposure to Ethereum’s token without the need to own it outright.

The ETH Price Surge

The surge in ETH comes on the heels of Ethereum’s transition from the proof-of-work to proof-of-stake consensus mechanism in 2022. The ETH price is currently trading 0.74% down at $2,468 with a market cap of $296 billion.

This shift has reportedly impacted the blockchain’s decentralization, making Ether more akin to other altcoins beyond Bitcoin (BTC). These altcoins have been classified as securities by the Securities and Exchange Commission (SEC), as highlighted in the report.

However, the path to a spot Ether ETF approval faces challenges. Ongoing lawsuits by the SEC against crypto exchanges offering staking services for proof-of-stake blockchains, including Ethereum, present hurdles. The report notes that the resolution of these lawsuits is crucial for a smoother approval process for a spot Ether ETF. Investors will closely monitor the development of this regulatory landscape as the market awaits further clarity on the potential approval.

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