Why some in crypto don’t want Ethereum ETFs to win approval — yet

Why some in crypto don’t want Ethereum ETFs to win approval — yet
The US SEC, led by Gary Gensler, may ask Larry Fink's BlackRock and other Ether ETF applicants to withdraw their applications.
  • Bitwise CIO Matt Hougan says it would be good for crypto if the SEC delays approval of an Ethereum ETF until December.
  • The comments come as market watchers say odds of approval in May are dwindling.
  • Bitcoin ETFs have smashed expectations, bringing in a whopping $12 billion in inflows in only a few months.
  • One expert suspects BlackRock may even withdraw its pending Ethereum ETF application.

Hopes are fading that the US will soon greenlight spot Ethereum exchange-traded funds. And Bitwise’s chief investment officer said that’s a good thing.

”Wall Street, traditional finance just started ingesting this giant thing called Bitcoin,” Matt Hougan, CIO at the asset manager, said on a panel Tuesday at the Digital Asset Summit in London. “We need another eight or nine months of digesting Bitcoin.”

Hougan said on X after the event that his comments are controversial as hype for an Ethereum ETF lingers.

VanEck is the first Ethereum ETF application on the Securities and Exchange Commission’s pile. The regulator is due to decide the outcome of the application on May 23.

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Hougan’s surprising take comes as market participants look to Ethereum after Bitcoin became the fastest-growing ETF sector since the SEC approved them in January.

With $65 billion in trading volumes this month, Bitcoin’s inflows have shattered expectations, bringing in $12 billion.

But hopes for its Ethereum counterpart are dwindling: Bloomberg Intelligence analysts this month lowered their odds of a May approval to just 35%.

‘Good for the industry’

If the SEC does push back that deadline to December “that will be a net good for the crypto industry and ultimately, for ETH ETF flows,” Hougan said at the event.

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“Spot Ethereum ETFs will gather more assets if they launch in December vs. if they launch in May,” he added on X.

“I tend to agree,” Bloomberg Intelligence analyst James Seyffart wrote in an X repost of Hougan.

Seyffart reiterated his bearishness for a May 23 nod: “The SEC hasn’t engaged with issuers on Ethereum specifics,” unlike its approach to its Bitcoin ETF counterparts.

Bitwise doesn’t have an active spot Ethereum ETF filing before the SEC.

Different this time

Jake Chervinsky, chief legal officer at Variant Fund, said on X that one key difference between the Ethereum and Bitcoin applications is that the SEC doesn’t face the legal pressure it did with Bitcoin ETFs.

In August, a court victory by Grayscale against the agency “basically forced it” to approve the ETFs, Chervinsky wrote.

Adding to the pressure: A letter drafted last week by two US senators urged the SEC not to approve any other crypto-based exchange-traded products.

The letter shows “buyer’s remorse” following the success of spot Bitcoin ETFs, Bloomberg Intelligence analyst Eric Balchunas said.

He added that that pressure is now part of why he and his colleagues are pessimistic that Ether ETFs will be approved.

Possible BlackRock withdrawal

Chervinsky earlier this month cited “political blowback” suffered by the SEC surrounding spot Bitcoin ETF approvals as a sign the agency may ask BlackRock and other Ether ETF applicants to withdraw their applications.

BlackRock and the SEC have a “collaborative relationship,” so BlackRock may withdraw its Ethereum application, Chervinsky said.

“I bet they will,” he said.

In an email to DL News, BlackRock declined to comment on its active filings with the SEC.

Tyler Pearson is a markets correspondent at DL News based out of Alberta, Canada. Got a tip? Reach out at ty@dlnews.com.