Coinbase analyst David Han suggests that while the market generally believes U.S. regulators won't approve an Ethereum spot ETF in the near term, the likelihood of approval remains underestimated.
Underestimated Approval Timeline and Probability
In a recent report, Han stated:
"We believe the market may be underestimating both the timing and probability of approval. Ethereum could still see unexpected upside in the coming months, with no major supply overhang from token unlocks or miner sell pressure."
The U.S. Securities and Exchange Commission (SEC) must decide by May 23–24 whether to approve Ethereum spot ETF applications from VanEck and Ark Invest/21Shares.
Shifting Market Expectations
Approval odds have dropped significantly this month. Bloomberg ETF analyst Eric Balchunas described the chances as "slim to none," citing the SEC’s ongoing silence toward issuers.
However, Coinbase notes uncertainty around three key questions:
- Will a U.S. Ethereum spot ETF emerge?
- When might approval occur?
- What regulatory hurdles exist?
👉 Why Ethereum’s futures-spot correlation matters
The Bitcoin Precedent and Ethereum’s Unique Challenges
Like Bitcoin ETFs, approval could hinge on the high correlation between CME futures and spot prices. Han argues that any rejection would likely center on Ethereum’s proof-of-stake (PoS) mechanism—a key difference from Bitcoin.
Staking Complications
Without clear staking regulations, approval seems unlikely. Notably, Ark Invest’s updated ETF proposal removed staking components. Han clarified:
"This shouldn’t impact the status of unstaked Ethereum."
Market Sentiment and Legal Risks
- Polymarket data shows just a 16% chance of May approval.
- Grayscale’s ETHE trades at a 24% discount to NAV.
- Coinbase estimates a 30–40% approval probability, with potential lawsuits if rejected.
Balchunas warns the SEC may classify Ethereum as a security, justifying ETF denials.
Ethereum’s Underperformance
Year-to-date (YTD) returns:
- Ethereum: +33%
- Bitcoin: +57%
- Solana (SOL): +64%
The ETH/BTC ratio sits at 0.045, its lowest since April 2021.
FAQ
Q: Why is Ethereum’s PoS mechanism a regulatory hurdle?
A: Staking introduces compliance questions absent in Bitcoin’s proof-of-work model. The SEC may view staking rewards as securities offerings.
Q: How does Ark Invest’s updated proposal address staking?
A: By excluding PoS elements, the proposal avoids staking-related scrutiny—though this doesn’t resolve broader classification debates.
Q: What happens if the SEC rejects the ETFs?
A: Issuers may sue, as seen with Grayscale’s Bitcoin ETF case. Litigation could delay or force approval.
👉 Tracking crypto ETF developments
Disclaimer: This content is for informational purposes only and does not constitute investment advice. Investors should conduct independent research before making decisions.
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