How this crypto hedge fund will trade the Ethereum ETF decision

How this crypto hedge fund will trade the Ethereum ETF decision
Ethereum may be about to experience a "sell the rumour, buy the news" event. Credit: Justin Lane/EPA/Shutterstock
  • The SEC is likely to reject Ethereum spot ETFs.
  • But Ethereum may still rise in the aftermath of the event.

The deadline for the Securities and Exchange Commission to approve or deny spot Ethereum exchange-traded funds is only nine days away.

The outlook is gloomy. Bloomberg Intelligence ETF analyst Eric Balchunas told DL News that he doesn’t expect approval before the end of 2025. Bettors on Polymarket, meanwhile, ascribe a 14% chance of the ETFs getting approved before May 31.

But the consensus around the SEC’s decision may offer an opportunity to crypto traders.

“Sell the rumour, buy the news”

There’s an expression in markets: Buy the rumour, sell the news.

It refers to the practice of accumulating an asset — a crypto coin, or a company stock — in the lead-up to a scheduled, bullish event, and dumping it after the announcement.

The launch of the Bitcoin spot ETFs is a good example: Bitcoin rose 77% in the three months leading to the approval, but crashed 20% immediately after the ETFs were greenlit.

The Ethereum ETFs might offer a similar strategy, but in reverse, Quinn Thompson, founder of crypto hedge fund Lekker Capital, told DL News.

He suggested that the rejection of the Ethereum ETFs may lead to some bullish price action.

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“It’s clear that positioning and sentiment is skewed bearish going into the event, given consensus is strongly towards a rejection,” Thompson said. “But given everyone is largely on one side of the boat going in, you should be looking to fade [the market’s expectations].”

”In these situations, it takes a drastically better upside or worse downside to not fade consensus going [into the event],” he added.

In other words, the rejection is likely priced in already, and market participants may find themselves caught off guard if Ethereum suddenly pushes higher.

“My best guess is that it’s a nonevent, as a likely denial is hopefully incorporated into the market,” Brian Rudick, senior strategist at crypto trading firm GSR, told DL News.

The warning signs are all there, Rudick said — the SEC’s lack of engagement with prospective ETF issuers, Ethereum’s uncertain regulatory status, and the agency’s investigation into the Ethereum Foundation.

Thompson, meanwhile, said that the SEC’s reasoning behind the anticipated rejection would likely affect any trading strategy.

“If there’s a rejection due to litigation, I could see that bringing the market down a bit,” he said.

The SEC has until May 23 to decide whether to approve or reject asset manager VanEck’s application to launch a spot Ethereum ETF.

Crypto market movers

  • Bitcoin is up 1% over the past 24 hours and is trading at $61,835.
  • Ethereum is up 0.3% to $2,918.

What we are reading

Tom Carreras is a markets correspondent at DL News. Got a tip about Ethereum ETFs? Reach out at tcarreras@dlnews.com.

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