Ethereum ETFs: What ‘convinced Grayscale to withdraw?’ Analysts weigh in

• Grayscale makes a U-turn on ETH futures ETF application 
• Analysts offer divergent views on Grayscale’s move and SEC’s next play. 

Grayscale has withdrawn its Ethereum [ETH] futures ETF filing, eliciting mixed signals as analysts struggle to interpret how this could impact the SEC’s next move.  

Bloomberg ETF analyst James Seyffart called the application a “Trojan horse” that the exchange could use to sue the SEC if it denied its spot ETH ETF application, as it did in the spot Bitcoin [BTC] case. 

Now that Grayscale has withdrawn the filing, the analyst noted, 

“Maybe the SEC spoke with Grayscale about this… And whatever was said convinced Grayscale to withdraw? (This is a complete guess)”

No clear read on SEC’s Ethereum ETF approval move

Bloomberg ETF analysts have long maintained low odds of May approvals for the spot ETH ETFs in May.

Indeed, the market looks convinced that nothing positive will happen in May. According to prediction markets, Polymarket, May approval bets have dropped below 10%.  

Another Bloomberg analyst, Eric Balchunas, commented that, 

“Sounds like saying this is a good sign they’re not gonna pursue a lawsuit this time around?”

However, when asked whether Grayscale’s withdrawal of the filing could mean that a May approval was likely, Seyffart was conflicted and answered, 

“I *DO NOT* think that’s gonna happen (though odds aren’t zero). So, I *DO* think it was something else. That said — honestly — that’s one of the very few reasons that I’d voluntarily withdraw this if I were Grayscale.” 

Nate Geraci of ETF Store also couldn’t read Grayscale’s move. However, he pointed out that, 

“Only reason I would do this if I were Grayscale is b/c I have “assurances” spot eth ETF will be approved at some point.” 

On her part, Eleanor Terrett, market watcher and FOX Business journalist, noted that muted demand for ETH futures could be the reason for Grayscale’s move.

There are a handful of ETH futures ETFs in the US per Blockworks ETF tracker. 

However, Terret noted that other Ethereum futures ETFs were approved in different frameworks, 

“The others were approved under the 40 Act, not the 33 Act?” 

For perspective, the Investment Company Act of 1940 (40 Act) and the Securities Act of 1933 (Act 33) are two different ETF approval regimes in the US. 

In a recent interview, SEC’s chair, Gary Gensler, dodged questions on the status and fate of the spot ETH ETF filings with ambiguous answers. 

In the meantime, ETH extended its short-term price range of $2900 — $3300. It has been stuck in the range since mid-April. 

That said, even last week’s over $30 million capital inflows didn’t induce a range breakout. However, this could change after the SEC’s decision on spot ETH ETF applications in late May.