Efe Nail Saltık 
Coinbase analyst David Han stated that the market “underestimated” the timing and possibilities of a potential spot Ethereum ETF approval. He added that this mismatch creates opportunities for “positive surprises” since there is no major obstacle on the supply side.
Han noted that the market is underestimating the chances of spot Ethereum exchange-traded fund (ETF) approval, with the broad market consensus being that this approval will not happen anytime soon.
“We believe the market has underestimated the timing and likelihood of potential approval,” Han wrote in a report released Thursday. “Ether may have the potential to surprise on the upside in the coming months and does not appear to have major supply-side hurdles such as token unlocks or miner selling pressure.”
There are important deadlines of May 23 and 24 for the Securities and Exchange Commission (SEC) to decide whether to approve spot Ethereum ETF applications submitted by VanEck and ArkInvest/21 Shares.
While approval expectations have diminished significantly this month, Bloomberg ETF analyst Eric Balchunas described the chances of approval as “very low” due to the SEC’s silence on issuers.
However, Coinbase stated that the existence of a spot Ethereum ETF in the US is a question of “when” and not a question of “whether”. He said the rationale used to approve spot Bitcoin ETFs — that the correlation between CME futures products and spot exchange rates is high enough — also applies to Ethereum.
Stating that if the correlation continues, the remaining possible reasons for rejection will probably be related to the differences between Ethereum and Bitcoin, Han said that the most important one is Ethereum’s proof-of-stake mechanism.
Interestingly, Coinbase omitted the staking component from its spot Ethereum ETF application last week as Coinbase considers that without clear regulatory guidance on staking, spot Ethereum ETFs containing staking rewards are unlikely to be approved any time soon. “We think this should not affect the status of unstaked ether,” Han added.
Ethereum-based decentralized prediction market platform Polymarket prices the probability of a confirmation in May at 16%, while Grayscale Ethereum Trust (ETHE) is trading at a 24% discount to its net asset value.
But with cryptocurrencies increasingly becoming an election issue and facing possible lawsuits if rejected, Coinbase believes the chances of approval are around 30-40%.
On Tuesday, Balchunas noted that a newly revealed detail in a spot Ethereum ETF filing suggests the SEC is considering ether as a security in possible ETF rejections.
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