Bloomberg ETF analyst James Seyffart believes the approval of spot Ethereum ETFs was likely driven by political considerations rather than purely financial factors.
Rachel Wolfson at Consensus 2024, Seyffart discussed the timeline and approval process for spot ETH ETFs, including the 19b-4 rule change and the role of the SEC. He suggested that the political climate, influenced by the Biden administration and responses from the crypto community, played a significant role in the approval process.
On May 23, the SEC officially approved 19b-4 applications from major firms such as VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise to issue spot Ether ETFs.
“We think this was a complete political decision. We think it was a 180 from the SEC,” Seyffart stated.
SEC Initially Unlikely to Approve Spot ETH ETFs
Seyffart noted that there were initially low expectations for approval due to the SEC’s hostile stance and lack of communication. He indicated that the eventual approval represented a significant deviation from the SEC’s usual position, likely influenced by political pressures.
“I think the SEC, until the week before, was planning to deny the Ethereum ETFs,” he said. “There’s no smoking gun that says this is exactly what happened… but all signs are pointing. There’s a lot of circumstantial evidence.”
He also highlighted the timing of the decision, which coincided with notable political events, such as former President Trump’s pro-crypto stance and bipartisan support for crypto-friendly legislation.
Increased Likelihood of Approval
Seyffart and his colleague Eric Balchunas have gained prominence for their analysis of Bitcoin and Ethereum ETFs. They increased the likelihood of spot ETH ETF approval to 75%, up from a previous estimation of 25%, especially after the final deadline for 19b-4 forms passed last week.
During the interview, Seyffart predicted that the Ethereum ETFs might launch within weeks despite the typically lengthy approval process. “Usually that process takes up to five months on the long end. More standard is 3 to 4 months,” he said. “We are expecting this to be more expedited obviously, especially if this is political.”
Limited Prospects for Other Crypto ETFs
Seyffart expressed skepticism about the approval of other crypto ETFs, such as Solana, without significant regulatory changes. He emphasized the need for a regulated market to monitor these assets for fraud and manipulation.
In contrast, crypto investor and trader Brian Kelly has suggested that Solana could potentially be the next cryptocurrency to have a spot ETF in the United States. On a recent episode of CNBC’s ‘Fast Money’, Kelly, founder and CEO of the BKCM Digital Asset Fund, speculated, “The trade now is, who’s next? You’ve got to think about Solana as probably the next one. Bitcoin, Ethereum, and Solana are probably the big three for this cycle.”