SEC Expected to Reject Ether ETFs in May, Is an Ethereum Bloodbath Incoming?

Experts anticipate the SEC's rejection of current spot Ethereum ETF applications in May 2024, potentially leading to a price decline for Ethereum and a possible breach of the $3,100 support level.
SEC Expected to Reject Ether ETFs in May, Is an Ethereum Bloodbath Incoming?

Key Insights

  • Experts expect the SEC to reject current spot Ethereum ETF applications in May 2024.

  • This rejection could cause a price drop for Ethereum, potentially breaking below $3,100 support.

  • A further drop below $3,000 could trigger liquidations worth $851 million for leveraged Ethereum traders.

The future of Ethereum and its leveraged investors may be in the hands of the US SEC—at least in the short term.

The May deadline for the spot Ethereum ETF applications is drawing near with each passing day, and experts are pretty sure that the current applications are due for a rejection.

Why do experts expect a rejection, what might happen to Ethereum if we see this rejection, and how bad might the damage be?

Let’s see what the dynamics around these ETFs are.

Most Definitely a Rejection

According to recent reports from several industry commentators and analysts, the SEC is expected to deny the current spot Ethereum ETF applications in May.

At the time of writing, the 23 May deadline for the ETF approvals is a little more than three weeks away.

This means that the clock is ticking, and everyone involved must now quicken their pace.

Most of the speculation about a rejection comes from several meetings between the aspiring issuers, and the SEC—none of which have been conclusive so far.

These discussions have been reported as being one-sided so far, with no headway in the SEC's stance.

This lack of dialogue (stemming from the SEC) suggests that the SEC is trying to take its time, and possibly extend the approval timeline to June or thereabouts, just as it did with Franklin Templeton’s application this week.

The SEC’s Current Stance

So far, all of the major applicants include Grayscale, Fidelity and Blackrock among others, and many analysts, like the VettaFi ETF data analyst Todd Rosenbluth, believe that we may not even see an approval until late this year, or even longer.

Reuters reports that the the regulatory environment is being described as “cloudy,” by analysts, lowering the chances that we see an approval.

Moreover, Bloomberg ETF analyst Eric Balchunas in an 11 March post, also reduced his estimates of approval to around 35%, because “all the signs/sources that were making us bullish (in January) for the Bitcoin ETFs are not there this time

Incoming Bloodbath for Leveraged Ethereum Investors?

As indicated by Ethereum's chart, the cryptocurrency is currently holding its own above the $3,100 support but is still at risk of a break below.

<div class="paragraphs"><p>Ascending trendline with Ethereum</p></div>

Ascending trendline with Ethereum

This $3,100 zone is one of the most important zones on Ethereum’s chart because if we see a break below, Ethereum will decline further and then face resistance at the bottom of the trendline above, anywhere between $3,000 and $2,900.

This is where it gets interesting.

The ascending trendline above has been valid, somewhat for most of the year, and is unlikely to be broken.

<div class="paragraphs"><p>Ethereum's Liquidation Heatmap</p></div>

Ethereum's Liquidation Heatmap

However, if for some reason (like a spot Ether rejection), Ethereum breaks below $3,000 and declines further down, Coinglass data shows something scary,

Thousands of leveraged traders would have been kicked out of their trades, and a staggering $851 million would have been liquidated by the time Ethereum hits $2,803.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.

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