Bloomberg analyst says Ethereum ETF is likely influenced by political factors

Bloomberg ETF analyst James Seyffart has asserted that the recent approval of spot Ethereum ETFs was likely influenced by political factors rather than purely financial considerations. Speaking with Rachel Wolfson from Cryptonews at the Consensus 2024 event, Seyffart elaborated on the approval process and the timeline involved, highlighting the impact of the political climate on this significant regulatory decision.

Seyffart explained that the approval process for spot Ethereum ETFs included the critical 19b-4 rule change and the role of the SEC. He suggested that the political environment, including the Biden administration’s actions and the crypto community’s responses, played a crucial role in the approval process. On May 23, the SEC approved 19b-4 applications from prominent financial firms such as VanEck, BlackRock, Fidelity, Grayscale, Franklin Templeton, ARK 21Shares, Invesco Galaxy, and Bitwise, allowing them to issue spot Ether ETFs.

Initially, there was skepticism regarding the approval due to the SEC’s historically hostile stance towards cryptocurrency and the lack of clear communication from the regulatory body. Seyffart noted that this approval marked a significant shift from the SEC’s usual approach, indicating potential political pressure. He remarked, “I think the SEC, until the week before, was planning to deny the Ethereum ETFs. There’s no smoking gun that says this is exactly what happened, but all signs are pointing to political influence.”

Seyffart also pointed out that the timing of the approval aligns with notable political events, such as former President Trump’s pro-crypto stance and bipartisan efforts to promote crypto-friendly legislation. These political dynamics may have influenced the SEC’s decision, reflecting a broader acceptance and support for cryptocurrency within the political arena.

Seyffart and his colleague, Eric Balchunas, have become notable figures in the ETF space, particularly for their insightful analysis of Bitcoin and Ethereum ETFs. They increased the likelihood of spot ETH ETF approval to 75%, up from a previous estimate of 25%, especially as the final deadline for 19b-4 forms had passed the previous week. During the interview, Seyffart predicted that the Ethereum ETFs could be launched within weeks, despite the traditionally lengthy approval process. He stated, “We are expecting this to be more expedited, especially if this is political.”

Beyond Bitcoin and Ethereum, Seyffart expressed skepticism about the approval of other crypto ETFs, such as Solana, without significant regulatory changes. He emphasized the necessity of a regulated market to monitor these assets effectively for fraud and manipulation, suggesting that the current regulatory framework is insufficient for broader cryptocurrency ETF approvals.

In contrast, crypto investor and trader Brian Kelly has a more optimistic outlook for the future of other crypto ETFs. During a recent episode of CNBC’s ‘Fast Money,’ Kelly, who is also the founder and CEO of the BKCM Digital Asset Fund, speculated that Solana could be the next cryptocurrency to receive a spot ETF in the United States. He posed the question, “The trade now is, who’s next?” and suggested, “You’ve got to think about Solana as probably the next one. Bitcoin, Ethereum, and Solana are probably the big three for this cycle.”

This dynamic and evolving situation underscores the intersection of politics and finance in the regulation of cryptocurrencies, highlighting the potential for further developments and approvals in the crypto ETF space. As political influences continue to shape regulatory decisions, the future of cryptocurrency ETFs remains a closely watched and highly debated topic.