Grayscale Withdraws Application for Ethereum Futures ETF Approval from SEC

Jimmy Aki
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Grayscale, a major crypto asset manager, has scrapped its proposal to launch an Ethereum futures exchange-traded fund (ETF). The company withdrew its application for a rule change to the Securities and Exchange Commission (SEC) on May 7.

Grayscale Futures ETF Withdrawal Tagged as a “Trojan Horse” Move

Grayscale’s notice of withdrawal did not provide a clear reason for this abrupt shift, leaving analysts and investors to speculate on the underlying reasons.

Grayscale Futures ETF
Excerpt of Grayscale Futures ETF withdrawal notice

Bloomberg ETF analyst James Seyffart suggested that Grayscale futures ETF’s initial filing could be a “Trojan horse” to pressure the SEC into approving a spot Ether ETF.

The ETF analyst’s speculation stemmed from Grayscale’s previous legal battle with the SEC, where it challenged the agency’s approval of Bitcoin futures ETFs while denying Bitcoin spot ETFs. But the eventual approval of its spot Bitcoin ETF has made Grayscale Bitcoin Trust (GBTC) record a 72-day outflow streak.

Seyffart’s theory implied that Grayscale might be positioning itself for another legal confrontation with the SEC to secure approval for a spot in Ether ETF.

Grayscale withdrew its application a few weeks away from the SEC’s deadlines to rule on several spot Ether ETF applications from other asset managers on May 23.

It could be recalled that Grayscale Futures ETF was initially filed on September 19, 2023, which aimed to create an investment vehicle tracking Ether futures contracts on the Chicago Mercantile Exchange (CME) and list it on the New York Stock Exchange (NYSE).

However, the SEC had delayed its review multiple times, citing the need for additional time to assess the proposal. These delays have already occurred thrice, with March 22, 2024, being the recent time the regulatory announced a delay on its decision for approval.

Seyffart’s speculation reflects global cryptocommunity’sities confusion and uncertainty, especially given the recent delay in the SEC’s decision regarding the Invesco Galaxy spot Ethereum ETF on May 6, with the new deadline set for July 5, 2024.

Meanwhile, the US regulatory body also delayed its decision on Franklin Templeton’s spot Ethereum ETF on April 23, postponing the deadline to June 11, 2024.

The odds of approval for an Ethereum spot ETF have decreased, particularly due to recent developments.

A newly unredacted complaint from Consensys Software Inc. revealed that the SEC allegedly classified Ethereum as a regulated security last year, contradicting previous public statements that no decision had been made.

Traders short Ether Amid Grayscale’s ETF Futures Withdrawal

Ether traders have increased their short positions in the last 24 hours following Grayscale Investments’ withdrawal of its Ethereum futures ETF application.

Despite Ether’s 3.12% drop to $3,002 price level, traders anticipate further decline, evident from the $345 million in short positions set to liquidate if the price rises by 3%. In contrast, a 3% drop to $2,920 would only liquidate $237 million in long positions.

Grayscale Futures ETF
Traders set to liquidate ETH if price rises by 3%

There have also been concerns over Ethereum’s usage and lack of speculative interest from short-term holders, with on-chain analyst James Check highlighting the low usage utility affecting Ethereum’s burn mechanism.

The current market conditions suggest a cautious outlook for Ether, with traders closely monitoring key support levels and market developments for clues about the future direction of prices.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.