The odds of an ETH ETF just shot up

I woke up this morning to my Whatsapp and Twitter blowing up. I checked the markets, and not much had moved, until I swiped to my crypto watchlist, and saw…ETH up 18%???

The first tweet I read was this - the SEC has asked ETF filers to update their 19b-4 filings in a hurry:

Why is this a positive sign? Leading up to the BTC ETF approval in January we saw engagement and dialogue between the SEC and ETF filers. Until today, this dialogue around the ETH ETF was absent. The request to update 19b-4s seems strangely sudden, given the deadline for approval is coming up in two days. A cryptic tweet from Vaneck confirms that they are urgently scrambling to meet the SEC’s request.

Why would the SEC do a 180 degree turn suddenly, two days before the deadline? We know that Gary Gensler at the SEC has been unfriendly to crypto, and Biden, until now, has enabled him to keep his thumb down on the industry. However, Trump has come out in his campaign as a crypto-friendly candidate, winning him votes among the younger generation of crypto adopters. It wouldn’t surprise me if Biden has decided that he needs to get friendly with the crypto industry or else risk alienating those voters.

Adam Cochran has an interesting take on the political drivers behind this potential decision:

There is much more at stake than just the price of ETH. The bull case is that we get certainty towards a more friendly regulatory environment towards crypto, which unleashes a new wave of inflows and development in the space. I had mentioned last week on my Greed is Good podcast that I liked the odds of rotating out of BTC and into ETH, as the ETH/BTC cross was already pricing in a pessimistic outlook for ETH’s ETF approval prospects. My thoughts at the time were that even if it was denied this month, it would still get approved within 12 months. This is one of those instances where as a trader, you want to stack the odds in your favor as you never know what will happen.

In the paid subscriber section I’ll discuss my target for ETH/USD and ETH/BTC, as well as alternative ways to get asymmetric exposure that offer more upside or less downside than just being long spot.