Grayscale Pushes for Ethereum ETF Despite Low Approval Odds

Grayscale is pushing forward with its goal to launch a spot Ethereum exchange-traded fund (ETF), updating its application to the SEC. The company argues that the success of Ethereum futures ETFs supports the case for a direct Ethereum ETF. Grayscale's proposal aims to convert its Ethereum Trust into an ETF for trading on NYSE Arca.

The firm stresses the SEC's past approval of Ethereum futures ETFs as a reason to green-light spot Ethereum ETFs. It points to effective market surveillance by the CME and correlation analysis by Coinbase as evidence that fraud and manipulation can be managed. Grayscale believes this justifies the approval of spot Ethereum ETFs.

Craig Salm, Grayscale’s Chief Legal Officer, expresses confidence in the demand for a spot Ethereum ETF, equating its potential to that of Bitcoin ETFs. The Grayscale Ethereum Trust, managing $11.8 billion in assets, represents a significant portion of the Ethereum market. The move to an ETF is expected to unlock $1.73 billion in value.

Prospects for approval appear dim, with the likelihood of SEC endorsement falling to 26% according to predictions. This drop is partly due to concerns raised by two U.S. senators about the integrity of the cryptocurrency market, questioning the adequacy of trading volumes and the correlation between futures and spot markets for effective surveillance.

Despite these challenges, some industry experts remain hopeful. Matt Hougan from Bitwise suggests a 75% chance of approval by May, while Bloomberg’s Eric Balchunas sees Grayscale’s amendment as a positive sign amid pessimistic indicators.

In essence, Grayscale remains committed to its spot Ethereum ETF, leveraging regulatory precedents and detailed market analysis to make its case. While facing regulatory and political hurdles, the firm's latest submission marks an effort to bring this innovative investment product to the market, amid varying opinions on its approval chances.