The deadline for spot Ethereum ETF applications is approaching, and the Securities and Exchange Commission (SEC) is close to making a decision, potentially leading to changes in the cryptocurrency market.
Investors and traders are closely monitoring the SEC's determination on these applications, as it has the potential to have a significant impact on Ethereum options trading and market volatility.
Two notable applications for spot Ethereum ETFs, submitted by VanEck and ArkInvest/21 Shares, are awaiting final approval or rejection from the SEC.
The looming decision deadlines for May 23 and May 24 have sparked intense speculation within the cryptocurrency community.
If the SEC rejects these ETF applications, what rationale will they provide? This question looms large as traders prepare for potential market reactions.
Impact on Ethereum Options Trading
Experts and analysts have expressed skepticism about the likelihood of SEC approval for Ethereum ETFs.
Wintermute OTC Trader Jake Ostrovskis observed that the market currently gives only a 16% probability of approval by the end of May.
Consequently, this outlook is leading to a rise in Ethereum options trading, as traders expect increased volatility around the SEC's decision deadlines.
Ostrovskis also added that implied volatility will significantly uptick before the end of the month, especially during the Ethereum ETF approval date.
"There is a slight kink in ether's implied volatility term structure. Pricing for May 31 sits around 60% before the market flattens, then rises again from June into year-end. This represents an 8-point premium to bitcoins volatility pricing, which holds around 52% at the same tenor," explained Ostrovskis in an Interview with The Block.
Uncertainty About Ethereum's Regulation
As the SEC's decision deadline approaches, investors are closely studying the regulation surrounding Ethereum.
While indicators suggest that approval is unlikely, attention shifts to the reasoning behind potential denials and their implications for future approvals.
"Analysts have noticed a hint in one of the SEC’s documents suggesting possible grounds for potential denial – specifically, filing the vehicles as a commodity trust was improper as ether may turn out to be a security. This adds to the view that the SEC had already made its decision long ago and is now engaging in post hoc rationalization to justify it," explained Presto Research analysts Peter Chung and Min Jung in an email sent to The Block.
Beyond the immediate implications for ETF approval, questions persist about whether ether will be designated as a security or a commodity.
Ethereum's Market Response
Despite the uncertainty surrounding the Ethereum ETF approval date, ETH's market performance remains resilient.
As of the time of this writing, Ethereum has increased by 18.2% in the last 24 hours and is currently being traded at a price of $3,623. It boasts a strong 24-hour trading volume of $24,397,685,522.