The journey towards the approval of a spot Ethereum (ETH) Exchange-Traded Fund (ETF) in the United States has taken a complex turn, with developments in recent weeks casting a shadow over its immediate prospects. Anticipation surrounding the potential approval was met with several setbacks, including a lack of communication between the Securities and Exchange Commission (SEC) and ETF applicants, as well as an ongoing investigation by the SEC in the Ethereum Foundation on the classification of Ethereum as a security.

This was followed recently by Bloomberg ETF analyst Eric Balchunas the odds adjusted of the ETF’s approval by May 23, the final deadline for one of the applications, to just 25%. This adjustment comes amid growing skepticism about the immediate future of Ethereum ETFs in the US market.

Why a Spot Ethereum ETF is Net Positive

In contrast to the disappointment that typically accompanies regulatory delays, Coin Bureau CEO Nic Puckrin presents an optimistic prospects on the postponement of the approval of Ethereum ETF. In a post on Polymarket’s prediction market has a probability of 19%,” said Puckrin, adding: “But maybe this is a good thing?”

Puckrin’s commentary elaborates on the disconnect between market expectations and reality, especially in the context of the disappointing reception of Ethereum futures ETFs launched last October. This event, he suggests, serves as a precedent, pointing to a possible lack of increased interest in commodity products.

He argues that a rush to alternative crypto products following the launch of Bitcoin ETF may not be met with the enthusiasm some are anticipating. “The timing is just not right,” Puckrin explains, highlighting the absence of immediate demand from broader TradFi participants for alternative products such as Ethereum ETFs.

Furthermore, Puckrin questions the intrinsic appeal of Ethereum ETFs in the absence of return-generating mechanisms such as staking. This aspect of Ethereum’s utility, while attractive to investors, introduces a layer of complexity into the SEC’s evaluation process. “Unless the ETH ETFs will provide returns to holders, it makes less sense for funds to hold the ETFs versus investing in ETH spot and staking,” he noted.

The regulator’s oversight of Ethereum’s staking function is another crucial aspect of Puckrin’s argument. He points out that the SEC’s current interest in classifying ETH as a “security,” primarily because of its staking capabilities, poses significant risk to the approval process.

“Let’s not forget that the whole deployment component is why Gary & Co is trying this now label ETH as a ‘security’,” Puckrin noted, highlighting the potential implications of such a classification on the broader Ethereum ecosystem and related financial products.

Bitwise agrees

Echoing Puckrin’s sentiments, Bitwise’s Matt Hougan expressed a preference for a delay of all ETF approvals until December. In a interview Along with Forbes, Hougan expressed his belief that the Ethereum ETF market would be more robust and attractive if the TradFi sector was given more time to acclimatize to Bitcoin and the broader crypto ecosystem.

“I think Ethereum will be very attractive. I think the ether ETFs will be more successful if they launch within 12 months than if they launch in May. I know that sounds crazy, but I think TradFi is still processing Bitcoin and if you give TradFi time to get comfortable with bitcoin and crypto, they will be ready for the next thing,” Hougan noted.

A potential slowdown could, as Puckrin notes, coincide with a burgeoning altcoin season and possibly a change in regulatory leadership at the SEC, paving the way for a more favorable environment for the introduction and adoption of Ethereum ETFs.

“By then we could be in the full bloom of a new Altcoin season with high demand for alternative ETF products. If you believe the latest polls, we could also be in the midst of an ownership change at the SEC,” Puckrin concluded, adding a ray of hope to the cloud of slowdown hanging over the Ethereum ETF outlook.

At the time of writing, ETH was trading at $3,344.

Ethereum price
ETH falls below 0.618 Fib, 1-week chart | Source: ETHUSD on TradingView.com

Featured image from iStock, chart from TradingView.com

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