On 21 May 2024, prominent macroeconomist and crypto analyst Alex Krüger provided new insights on social media platform X (formerly known as Twitter) regarding the potential for the U.S. Securities and Exchange Commission (SEC) to approve spot Ethereum ETFs. Krüger, who founded the asset management and advisory firm Aike Capital, offered a detailed analysis reflecting the rapidly changing sentiment in the cryptocurrency market.
Until this week, Krüger had been pessimistic about the likelihood of the SEC approving any spot Ethereum ETFs this year or soon. However, recent developments have prompted a reevaluation. On 20 May 2024, Bloomberg ETF analysts Eric Balchunas and James Seyffart significantly increased their estimated odds of SEC approval for spot ETH ETFs from 25% to 75%. This adjustment was based on emerging rumors suggesting that the SEC might be reconsidering its stance, driven by political considerations.
Balchunas shared the updated odds on X, noting that the shift was fueled by afternoon chatter indicating a possible reversal in the SEC’s approach to this increasingly politicized issue. This unexpected development has caused market participants to scramble to adjust their positions, many of whom had previously assumed that ETF approvals would be denied.
In his analysis, Krüger acknowledged the potential impact of these rumors. He stated that his base case scenario had been:
- Bitcoin rising significantly by the end of the year.
- Ethereum underperforming due to the expected rejection of spot ETH ETF proposals by the SEC.
- Ethereum outperforming post the U.S. presidential elections in November 2024, driven by a potential change in SEC leadership and subsequent approval of spot ETH ETFs in 2025.
However, the possibility of an SEC approval, possibly as early as this week, could accelerate these timelines. Krüger emphasized that the market had not fully priced in such an approval, suggesting that Ethereum could see a substantial rally if the approval were granted.
Krüger explained that the current market movements were primarily driven by repositioning and the closing of short positions, as the possibility of an SEC approval caught many off guard. He predicted that if approval were granted, it would lead to significant inflows into Ethereum, potentially pushing its price to all-time highs (ATHs).
He cautioned against underestimating the potential for approval, highlighting that such a decision could reinvigorate bullish sentiment and cause Ethereum to lead the market. Despite the day’s rally, he pointed out that ETH/BTC was still down year-to-date, indicating room for further growth.
Krüger also touched on the political dynamics influencing the SEC’s stance. He suggested that the seeming shift in the SEC’s approach might be politically driven, possibly influenced by the upcoming elections and the need to counteract former President Donald Trump’s recent pro-crypto stance.
He noted that if the SEC rejects the spot ETH ETF proposals, which he now views as unlikely, the market could experience significant pain. He advised traders to stay alert and monitor developments closely until the SEC’s decision on May 23rd, which is the SEC’s final deadline to make a decision on VanEck’s spot Ether ETF application.
Krüger also delvec into the political dynamics influencing the SEC’s stance. He posits that the seeming change in the SEC’s approach may be driven by top Democratic party members, potentially influenced by the upcoming elections. He believes this shift could be a reaction to former President Donald Trump’s recent support for cryptocurrency, forcing a strategic move from the Democrats to not appear anti-crypto.
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