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Grayscale Withdraws Ethereum Futures ETF Filing, Sparks Uncertainty in Crypto Market, Says Markus Thielen

Last Updated May 25, 2024 9:12 AM
Teuta Franjkovic
Last Updated May 25, 2024 9:12 AM
By Teuta Franjkovic
Verified by Peter Henn

Key Takeaways

  • Crypto markets are influenced by major events, data, and regulatory decisions.
  • Grayscale’s ETF withdrawal and political events highlight the complex relationship between crypto and regulation.
  • The growing political influence of the crypto industry is evident in lobbying efforts.
  • Meanwhile, Joe Biden will have to decide whether or not to veto pro-crypto legislation.

In a recent report, Markus Thielen, founder of 10XResearch, told CCN the complex and evolving interplay between cryptocurrency and regulatory frameworks.

The report argues movements in the crypto market are far from random. Instead, significant events, data points, and regulatory decisions all have an effect.

Grayscale’s ETF Withdrawal and Political Turmoil in Crypto Regulation

Recent news about Ethereum and regulations show how complex the relationship between crypto and regulators can be. A notable example was Grayscale’s withdrawal of their 19b-4 filing for an Ethereum futures ETF on May 8, 2024.

This move came unexpectedly. This is because the potential approval of this ETF might have set a significant legal precedent, similar to Grayscale’s lawsuit against the SEC in 2023.

The political environment also influences cryptocurrency regulation. On the same day Grayscale retracted its ETF filing, the US House of Representatives voted against the SEC’s crypto accounting policy. This has been a contentious issue, deterring banks from offering their services to crypto clients. SEC Chair Gensler supported the stringent policy, while President Joe Biden indicated a potential veto against the congressional resolution.

Trump Embraces Crypto, SEC Signals Shift, Ethereum Prices Surge

The intersection of cryptocurrency with politics has become more pronounced. For instance, former President Donald Trump’s called for crypto-friendly policies during a fundraising event. There, he positioned himself as a pro-crypto candidate against the perceived anti-crypto stance of the Democrats.

Thielen said:

“On the same day, Trump held a fundraising event for everybody who bought at least 47 Trump NFTs (at $99 each), and he vowed to stop the hostility towards crypto. By then, most became convinced that Trump (and the Republicans) would stand for crypto liberties while the Democrats were against them. Estimates are that 40% of US adults own crypto, making crypto not necessarily a swing vote decision for the November 5 US Presidential election. However, a presidential candidate’s views on crypto could impact the 2024 election.”

On May 20, 2024, the SEC’s request to tweak ETH Spot ETF filings signaled a potential shift towards more crypto-friendly regulation. This, in turn, led to a 20% increase in the price of Ethereum. Changes in regulatory approaches, especially last-minute ones as seen with the Fidelity application alteration, indicate a volatile regulatory environment where decisions can significantly sway market prices.

ETH price
Credit: Markus Thielen/Matrixport

$100 Million+ Contributions, Biden’s Crucial SEC Decision Looms

Crypto’s political donations exceed $100 million, with significant funds from entities like Coinbase and Ripple. These contributions aim to support favorable legislative environments for cryptocurrencies.

Thielen said:

“Super PACs backed by the crypto sector have raised more than $100m (only PAC backing Ron DeSantis’ failed presidential campaign and super PAC backing Democratic Senate candidates raised more), with $54 million coming from corporate executes (notably Coinbase and Ripple) – which allows for unlimited political spending. This $100 million is more than ‘Make America Great Again’ from Trump.”

The May 28 deadline approaches for President Biden to decide on the Joint Resolution that will overturn the SEC’s Accounting Bulletin No. 121 . One one hand, the decision could confirm a pro-crypto shift within the Democratic party. On the other hand, it could reinforce regulatory hurdles, with significant implications for the market’s trajectory.

Overall, the interaction between cryptocurrency entities, regulatory frameworks, and political dynamics forms a complex ecosystem where strategic decisions by key players can precipitate significant market shifts.

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