In contrast to the prevailing consensus within the broader market, the Matrixport analyst, Markus Thielen, envisions a scenario where the Securities and Exchange Commission (SEC) rebuffs all proposals for Ethereum spot Exchange-Traded Funds (ETFs) in the upcoming month of January.
Despite the numerous interactions and the submission of updated S-1 prospectuses by applicants in recent weeks, Thielen highlighted in a comprehensive report that these submissions still fall short of a pivotal prerequisite that must be satisfied before the SEC can grant its approval.
Thielen’s stance is underpinned by an intricate analysis of the political dynamics at play and the SEC’s heightened concerns regarding regulatory compliance. The analyst posited that, while the introduction of an ETF could potentially catalyze the cryptocurrency sector’s growth within the United States, the Chair of the SEC remains steadfast in his belief that the industry demands more rigorous adherence to compliance standards.
“Chair Gensler of the SEC is not wholeheartedly embracing the cryptocurrency landscape in the United States, and it may even be a remote possibility to anticipate his affirmative vote for Ethereum spot ETFs,” opined Thielen. “This aspiration might be realized by the second quarter of 2024, but we foresee the SEC’s rejection of all propositions this January.”
In a recent interview with CNBC, Gensler expressed his concerns, stating, “The cryptocurrency sphere has witnessed an alarming prevalence of fraudulent activities and unscrupulous actors. There exists a glaring lack of compliance, not just with securities regulations, but also with other legislations related to anti-money laundering and the safeguarding of the public from malicious actors,” emphasized the SEC Chair.
For several years now, the cryptocurrency industry has ardently pursued the establishment of an Ethereum ETF, with BlackRock, Fidelity, Franklin Templeton, Valkyrie, and VanEck, among others, representing the current cohort of 14 asset management firms fervently seeking the coveted SEC approval.
Should the SEC opt to reject the Ethereum spot ETF applications in the imminent month, Thielen envisions a domino effect, resulting in a cascade of liquidations, with billions of dollars tied up in perpetual long Ethereum futures being unwound. Such a scenario could potentially precipitate a substantial downturn in Ethereum’s valuation, to the tune of approximately 20%, bringing it back to the price range of $2,200 to $2,800, according to Thielen’s projections.
Presently, Ethereum, with a negative change of 8.14%, is trading at $2,562, as per The Block’s pricing data. The cryptocurrency, which is the largest by market capitalization, commemorates its 15th anniversary since the inception of its genesis block today. It has witnessed an approximate 7% increase in value since the commencement of the year and an impressive 30% surge over the past quarter.
Notwithstanding the potential short-term turbulence ensuing from a potential SEC denial, Thielen’s outlook for 2024 remains sanguine. Drawing from historical patterns observed during U.S. election years and the cyclical nature of Ethereum mining, Matrixport envisions Ethereum’s value surpassing its initial mark of $2,900 by the year’s end, offering a glimmer of hope to long-term investors amid the prevailing regulatory ambiguities.
