• Tue. Apr 23rd, 2024

J.P. Morgan-Spot Ether ETFs No More than 50% Likely to be Approved by May

Walter Swift

ByWalter Swift

Jan 19, 2024
Spot Ether ETFs no more than 50% likely to be approved by May – J.P. Morgan

There is no optimism from J.P. Morgan, the American investment bank and finance multinational, about the chances of Ethereum getting its Spot Exchange-Traded Funds (ETFs) by May, describing the possibility as not more than 50%. The bank echoed the sentiment through a team of expert analysts led by Nikolaos Panigirtzoglou in a note to clients on January 18, much to the surprise of many market observers who believe that chances are much more than a coin toss.

The note read, “While we are sympathetic to the above arguments, we are skeptical that the SEC will classify ether as a commodity as soon as May.” 

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While most market observers believed the recent SEC approval of Spot Bitcoin ETFs should push chances, J.P. Morgan begs to differ. The investment bank argued that the ongoing legal battles against the shift to a proof-of-stake model and the failure of the SEC to recognize the cryptocurrency as a commodity will hamper its chances, reducing it to no more than a coin toss.

What Would the Emergence of Ethereum Spot ETFs mean?

Investors in the United States currently have to own Ether tokens, the gap that ETFs aim to bridge. With spot Bitcoin ETF approval last week, investors can now buy shares in holding companies for the cryptocurrency, tying their money to Bitcoin price movements without acquiring tokens.

However, an arrangement like that is only possible with approval from the SEC that was granted to 11 proposed Bitcoin ETF issuers late last week, encouraging an influx of Ether ETF proposals. While the relative successes of the Bitcoin space made many observers optimistic, JPMorgan seems to hold a different opinion about the chances of users seeing Ether stocks by May.

However, some top industry analysts have dropped more liberal predictions. For example, Bloomberg intelligence analyst and ETF expert Eric Balchunas seems to think Ethereum ETFs have up to a 70% chance of getting the SEC nod by May, contrasting the conservative 50% projections.

How are Spot Ether ETFs different from Ether futures ETFs?

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Spot Ethereum ETFs are currently awaiting approval, and they differ from Ethereum futures, as the latter has been in the markets since last year.

When buying Ethereum futures, a user buys into a fund with a contract to trade Ethereum at a predetermined price on a given date, regardless of upward or downward price movements.

On the other hand, buying Spot Ethereum ETFs (as proposed) exposes investors to direct price movements. Investors gain when the value increases and lose when it decreases, almost perfectly mimicking the actual market.

Why is J.P. Morgan Skeptical About Spot Ethereum ETF Approval?

The memo to investors includes justifications for its “not higher than 50%” projection for Ethereum ETF approval before May. The note was overall a balanced assessment, noting several points for and against its favored possibility.

On reasons why the approval may be approved, J.P. Morgan pointed towards Ethereum ETF approval in September, implying that the SEC may already consider the cryptocurrency a commodity. However, the investment bank seems to believe this possibility is not strong enough to tip the odds in favor of approval, maintaining its neutral stance on the approval possibilities.

Justifying their viewpoint, analysts cited the recent transition from proof-of-work to proof-of-stake as negatively impactful on the decentralization of the Ethereum ecosystem, pointing out its similarity to most altcoins.

With altcoins generally deemed securities, the SEC may not be willing to approve a spot ETF for a security.

What Other Experts Have to Say

J.P. Morgan is not the only stakeholder with something to say about spot Ethereum ETFs. Polymarket, the prediction market, put the likelihood of an Ethereum ETF approval at 74%, almost mirroring the 70% projection by Eric Balchunas, the Bloomberg analyst.

With spot Bitcoin ETFs already on the market, the SEC appears to be taking a liberal stance toward digital currencies lately. Also, the agency has never listed Ethereum as a security, neither did it cite the cryptocurrency in its recent lawsuit against Coinbase.

Putting all these factors together, most analysts believe the SEC is setting the stage for a May approval of spot Ether ETFs, informing their relatively liberal predictions for the event.


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Walter Swift

Walter Swift

Walter Swift is an adept crypto writer, known for his deep insights into the decentralized world. His pieces artfully break down complex blockchain topics, making them accessible to a broad audience. With a passion for emerging technologies, Walter's articles are a beacon for crypto enthusiasts and novices alike.

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