In a landscape where cryptocurrency exchange-traded funds (ETFs) have become a hot topic of discussion, the Securities and Exchange Commission’s (SEC) silence on Ethereum ETFs is casting a shadow of doubt over the likelihood of their approval, according to insights from Bloomberg analyst Eric Balchunas.

Despite the growing popularity of Ethereum and its widespread adoption in the digital asset space, the SEC’s lack of communication with prospective fund issuers is signaling potential hurdles for those hoping for Ethereum ETF approvals by May.

Balchunas, a seasoned analyst in the ETF domain, has downgraded the probability of Ether ETF approval to a mere 35%. He points out that with a mere 73 days remaining until the final deadline, the absence of any feedback or engagement from the SEC is raising red flags.

“The main concern stems from the fact that there has been no communication or feedback from the SEC to the issuers. This is not a positive indicator,” Balchunas emphasized.

He highlights the intricate process involved in securing regulatory approval, noting that issuers typically require feedback from the SEC to address any concerns or compliance issues. However, the prolonged radio silence from the regulatory body suggests a potential roadblock in the approval process.

Balchunas also hints at a deliberate strategy from the SEC, suggesting that the silence may be intentional. Moreover, he speculates on SEC Chair Gary Gensler’s stance on Ethereum, noting Gensler’s perception of Ether as a security rather than a commodity akin to Bitcoin.

Balchunas highlighted the primary cause for apprehension, emphasizing the ominous 73-day countdown to the final deadline without any communication or comments from the SEC to prospective issuers. This lack of engagement raises red flags and casts doubt on the prospects of timely approvals for Ether ETFs.

“The SEC has to give comments, and the issuers have to work on correcting them. They may have to refile, and they might even want to have a couple of meetings – it’s kind of a long process,” noted Balchunas.

Adding to the mystery, Balchunas hinted at insider information suggesting that the SEC’s deliberate silence might be a strategic move. This revelation raises questions about the SEC’s intentions and its approach to working with potential fund issuers in the cryptocurrency space.

Balchunas also brought attention to SEC Chair Gary Gensler’s stance on Ether, proposing that Gensler perceives Ether as a security, creating a potential roadblock for approval. Gensler’s unwillingness to face additional “political blowback” following the approval of spot Bitcoin ETFs and the SEC’s legal setback to Grayscale in August 2023 further complicates the approval process.

Gensler’s previous experiences with regulatory approvals and court battles, particularly surrounding Bitcoin ETFs and the SEC’s legal dispute with Grayscale, could be shaping his approach towards Ethereum ETFs. Balchunas suggests that Gensler may be reluctant to endure further scrutiny and backlash from the industry, particularly if he perceives Ethereum as a security.

The dynamics surrounding Ethereum ETF approval appear starkly different from the race for Bitcoin ETFs. Balchunas admits to a gut feeling, a “sixth sense,” which he believes plays a pivotal role in assessing the likelihood of approval. While intangible, this instinctual judgment forms a crucial aspect of his evaluation process.

As the deadline for Ethereum ETF approvals looms closer, stakeholders in the cryptocurrency space are closely monitoring developments. The uncertainty surrounding regulatory approval underscores the complexities and challenges inherent in navigating the intersection of traditional finance and emerging digital assets.

In conclusion, the fate of Ethereum ETFs hangs in the balance as regulatory scrutiny and internal dynamics within the SEC continue to shape the landscape of cryptocurrency investments.