Ethereum Falls 6% as Regulatory Probe Reports Dim ETH ETF Hopes

Due to the regulatory drag on the market, Ether and other cryptocurrencies fell to levels close to $3,200. Experts predicted on Tuesday that the SEC will not approve Ethereum-based spot ETFs in May.

On Wednesday, Ethereum's ether {{ETH}} fell by as much as 6% on fears that the highly anticipated ETH exchange-traded funds may encounter an obstacle in their quest for U.S. approval.

An anonymous government agency has reportedly launched a clandestine investigation into the Ethereum Foundation, a nonprofit that contributes to the development of the blockchain powering the second-largest cryptocurrency, according to a report by CoinDesk earlier today. 

Fortune reported shortly thereafter that the US Securities and Exchange Commission is actively seeking to label the native token of the Ethereum blockchain as a security. This investigation began in 2022, after Ethereum transitioned to a proof-of-stake network.

After that, the price of ETH plummeted to $3,200. After recovering to close to $64,000 earlier, the biggest cryptocurrency, Bitcoin {{BTC}}, fell to approximately $62,000. Declining by 3% was the broad-market CoinDesk 20 Index (CD20).

I believe this has anything to do with the ETF... According to Scott Johnson, general partner at Van Buran Capital, the SEC has been in an untenable position with ETH for a while now, as per his post on X. My two cents: the SEC is reaching for the nuclear option, or it's trying to keep things vague for a little longer.

There may be more hurdles to building Ether ETFs in the US if ETH is classified as a security. The SEC must make a decision on clearance by May.

 In contrast to the lively discussions surrounding spot bitcoin ETFs before to their approval in January, a Bloomberg Intelligence analyst stated on Tuesday that he does not see such a fund being allowed by May due to the regulator's lack of involvement with prospective issuers. The SEC postponed its ruling on VanEck's proposed ether ETF earlier on Wednesday.

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