Coinbase Institutional believes an Ethereum (ETH) exchange-traded fund (ETF) is inevitable. The U.S. Securities and Exchange Commission (SEC) is likely considering it with the same rationale used to approve Bitcoin (BTC) ETFs earlier this year.
The SEC had noted the strong correlation between spot BTC prices on the Chicago Mercantile Exchange (CME) and the spot market, which is also true for Ethereum.
Correlation Analysis
Coinbase notes that the correlation analysis period for the spot BTC approval began in March 2021, one month after CME ETH futures launched. This suggests that the SEC may apply similar reasoning to ETH markets.
Odds of Approval
Despite the low odds of approval in May, Coinbase believes there’s room for a surprise. Polymarket estimates the odds of approval by May 31, 2024, at 16%. However, Coinbase estimates the odds to be closer to 30-40%.
Political Pressure
As crypto becomes an election issue, Coinbase believes the SEC may be less willing to deny an ETF. Even if an initial rejection occurs, litigation could reverse the decision.
Not All Applications Need Approval
Coinbase also notes that not all spot ETH ETF applications need to be approved simultaneously. Commissioner Uyeda’s approval statement for the spot BTC ETF criticized the rush to approve applications to prevent a first-mover advantage.
