Ethereum ETF approval odds jump from 25% to 75% – What changed?

• ETH ETF approval odds jumped from 25% to 75% after the recent SEC update.
• The market rallied, but 100% ETF approval is not guaranteed unless S-1s are approved, too. 

The US SEC’s reported surprise 180-degree pivot on Ethereum [ETH] ETF approval has tipped Bloomberg analysts to increase chances of approval odds from 25% to 75%. 

According to Bloomberg ETF analyst Eric Balchunas, the approval became a ‘political issue’ and could have led to the SEC’s move.

‘Update: @JSeyff, and I are increasing our odds of spot Ether ETF approval to 75% (up from 25%), hearing chatter this afternoon that SEC could be doing a 180 on this (increasingly political issue), so now everyone scrambling (like us everyone else assumed they’d be denied).’

The SEC has reportedly asked exchanges to update 19b-4 filings on an accelerated basis. This signals an approval intention per most market watchers.  

SEC’s update on Ethereum ETF approval

For the unfamiliar, an ETF can only be launched or sold to the US public when the SEC approves 19b-4 and S-1 forms.

Exchanges like the NYSE and Nasdaq submit the 19b-4 forms (also known as Exchange Rule Changes) to the SEC when listing a new product on their platforms. 

The S-1 forms, also known as ‘Registration Statements,’ are filed by potential issuers, in this case, asset managers like BlackRock, VanEck, etc. They cover the structure of the funds, their management, and the operations of the proposed ETF product. 

The development that shored up ETF approval odds from 25% to 75% involved the Exchange Rule Changes (19b-4s).

According to Balchunas, the SEC requested updated 19b-4s from exchanges by the morning on 21st May.

“Hearing the SEC wants revised 19b-4s returned to them by 10 am tomorrow morning (based on a bunch of comments they just received today) for likely approval as soon as Wednesday.’

Ethereum ETF approval and its impact

The development was reflected in the prediction market, Polymarket, as approval odds jumped from 10% to 59% at the time of writing. 

The changed sentiment was also evident on ETH price charts. The altcoin jumped by over 19% and hit $3.7K, erasing April losses. The bullish sentiment boosted the whole crypto sector, including

ETC rallied by 17%, from $28 to $32.9, and flipped the market structure bullish. With the ETC halving

However, according to Coinglass data, leveraged ETH short traders suffered the most from the update, with $79 million worth of short positions liquidated in the past 12 hours. 

That said, it’s worth noting that the update only involved the 19b-4s and not the S-1s. Nate Geraci of ETF Store predicted that SEC’s update could lead to ‘technical’ approval of 19b-4s but a slow-paced play on S-1s. 

“Technically possible for SEC to approve 19b-4s & then slow play S-1s (esp given reported lack of engagement here)”

If the 19b-4s are approved, the ETH ETF’s final approval could take some time. But according to some market watchers, it will be a matter of when, not ‘if.’ However, the staking feature remains an unresolved issue at this stage.