JPMorgan: Spot Ether ETF Approval Odds 50% by May

• Potential Approval of Spot Ether (ETH) Exchange-Traded Fund (ETF) by May 2023
• Ether as the Next Likely Candidate for Spot ETF Approval
• Implications of the SEC's Decision on Ether Classification
• Scepticism from JPMorgan's Analysts
• Surge in ETH and Expected Spot Ether ETF Approval Impact
• Transition of Ethereum and Impacts on ETF Approval

Potential Approval of Spot Ether (ETH) Exchange-Traded Fund (ETF) by May 2023

There persists an optimistic outlook in the crypto market regarding the possible endorsement of a spot ether (ETH) exchange-traded fund (ETF) by May 23 this year. This date is the Securities and Exchange Commission's (SEC) cutoff for the Ark 21Shares application. However, according to JPMorgan (JPM), the likelihood of such an approval by May does not exceed 50%.

Ether as the Next Likely Candidate for Spot ETF Approval

Following the intense interest in a BTC ETF last year, market participants have directed their attention towards ether as the next probable recipient of a spot ETF approval in the U.S. This expectation is mirrored in the shrinking discount to net asset value (NAV) for the Grayscale Ethereum$2,315 -2.42% Trust (ETHE). The trust's discount has steadily decreased since the summer and has remained roughly 12% over the past two months, per JPMorgan.

Implications of the SEC's Decision on Ether Classification

According to the investment bank, several individuals have suggested that the SEC's failure to reference ETH in its lawsuit against cryptocurrency exchanges for breaching securities law indicates the regulator's potential to categorize the cryptocurrency as a commodity in the upcoming months. The latter is a prerequisite for spot ETF approval. Others argue that the sanction of ether futures-based ETFs in September of last year inherently suggests that ether is considered a commodity.

Scepticism from JPMorgan's Analysts

Analysts led by Nikolaos Panigirtzoglou from JPMorgan expressed their doubts. While they are not opposed to the aforementioned arguments, they remain unconvinced that the SEC will recognize ether as a commodity as early as May. Furthermore, they note that the odds of obtaining a spot ether ETF endorsement by May this year do not surpass 50%.

Surge in ETH and Expected Spot Ether ETF Approval Impact

ETH has seen exceptional growth in recent weeks, following the authorization of a spot bitcoin ETF. Traders are wagering on the possibility of an ether exchange-traded fund being approved. If sanctioned, it would be the first time professional investors in the U.S. are able to gain exposure to the blockchain's token without the necessity to own it.

Transition of Ethereum and Impacts on ETF Approval

Ethereum's shift from the proof-of-work to proof-of-stake consensus mechanism in 2022 and the negative effect this transition has had on the blockchain's decentralization, now makes ether more comparable to other altcoins outside of bitcoin (BTC) that the SEC has categorized as securities. With current lawsuits by the SEC against crypto exchanges that provide staking services for proof-of-stake blockchains, including Ethereum, the approval of a spot ether ETF appears more complex, at least until these lawsuits reach a resolution.

Edited by Jonathan Stoker