If it is not passed, what reason will Ethereum Spot ETF be rejected?

Researcher: E2M Research, Steven

Looking back Ethereum Futures ETF I feel that there is still some sloppiness through this matter, and Ethereum is too complicated long than Bitcoin. Ethereum reason for rejection, there will definitely be an application for encryption assets in the future Spot ETF There is an example. However, in the traditional world, there will also be pork ETFs, oil ETFs and other commodities with particularly wide range of use scenarios have ETF products.

• CM: Spot ETF Passing or not is not at the technical level (POS or POW). Technical guidance is centralized, and the network is decentralization. Ethereum cannot pass, which means that subsequent encryption assets can basically not pass, because from the perspective of Decentralization, in addition to Bitcoin, Ethereum is the second degree of Decentralization of products.
• 70% passed!!!
• Dongzhen: ETH The scale is not large, the Grayscale and other project parties are not as driven, and from the perspective of the game, they are not as strong as the Bitcoin Spot ETF, and there are some decisive events, such as BlackRock's first application for Bitcoin Spot ETF and the victory of the Grayscale court lawsuit
• 50% !!!55 open!!

1. News

• 3.20

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2. Bitcoin related data

2.1 BTC Spot ETF Situation

There were 5 consecutive days of net outflows, but the total outflows began to narrow.

• ETF Bitcoin holdings: 800,000 pieces

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New ETF investors are strong, and selling pressure is coming from other Bitcoin owners. In the last 5 days, nine new (ex-GBTC) Bitcoin Spot ETF have seen net inflows of about $1.2 billion, but prices have fall down 8%. GBTC does have outflows, but mostly Genesis is selling, but he's just swapping GBTC shares for Spot BTC, so it's a neutral event. All in all, ETF has been a net buyer of BTC, with more long inflows.

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Crypto Assets lending company Genesis declared bankruptcy last year, but received bankruptcy court approval on Wednesday, February 14, US time, to sell about 35 million shares of the Grayscale Bitcoin Trust (GBTC) worth more than $1.3 billion. The proceeds from this exchanges will be used to repay creditors.

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2.2 Bitcoin Hold Waves

16.36% of Bitcoin has not been traded for more than 10 years, and most of this part may be lost Bitcoin.

2100* 16.36% = 3,435,600 Bitcoin

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3. Ethereum Spot ETF What are the reasons for rejection?

• Ethereum Spot ETF Status of application

• Ethereum is defined as a security

According to the GitHub repository on the organization's website, the Ethereum Foundation, a Swiss nonprofit at the heart of the Ethereum ecosystem, is facing challenges from unnamed "state authorities."

The confidential investigation comes at a time when Ethereum technology is changing, and its homegrown asset, ETH, may be facing an inflection point, and Xu long U.S. Investment Firm is looking to offer it as a exchange exchange-traded fund. Despite the recent approval of a series of Bitcoin ETF, efforts by the United States SEC (SEC) have been slow.

Following the publication of this article, Fortune reported that the SEC was seeking to classify ETH as a security, a move that would have a significant impact on Ethereum, ETH ETF, and the Crypto Assets as a whole. According to Fortune, financial regulators have issued subpoenas to investigate U.S. companies in the past few weeks.

If there is a suitable explanation to define Ethereum as a "security", then Ethereum's current level of disclosure and materials will definitely not pass. But Gary himself said in disguise that Ethereum is a commodity, not a security, and the Ethereum futures ETF has passed.

In addition, if Ethereum is defined as a "security" and then passed, it will have an exemplary effect on other Crypto Assets that have been defined as "security", so if it is not passed on May 24, it is not entirely a bad thing.

In the lawsuit against Coinbase, the SEC identified SOL, ADA, MATIC, FIL, SAND, AXS, CHZ, FLOW, ICP, NEAR, VGX, DASH, and NEXO Token as securities.

In the lawsuit against Binance, the SEC listed SOL, ADA, MATIC, FIL, ATOM, SAND, MANA, ALGO, AXS, and COTI as securities.

Crypto Assets are defined as Security and Commodity, meaning that they will be governed by different regulatory frameworks and laws, depending on which one they are classified as. This is important to understand because it will affect how Crypto Assets businesses and investors operate, profit models, and compliance requirements.

1. Crypto Assets as Security: When Crypto Assets are defined as securities, it is usually based on the so-called "Howey Test," a standard established by the U.S. Supreme Court to determine whether an investment is a security. If a Crypto Assets project involves investors' funds being invested in a common enterprise with the expectation of profit through the efforts of others, then such Crypto Assets may be considered securities. As a result, it will be heavily regulated by the US SEC (SEC) and other relevant financial regulators and will have to comply with a range of legal requirements, including registration requirements, disclosure requirements, and other investor protection regulations.
2. Crypto Assets as a Commodity: On the other hand, Crypto Assets are more likely to be considered a commodity if they are more long to be considered a commodity, such as Bitcoin and Ethereum, which are widely considered to be Decentralization and not Crypto Assets controlled by any particular entity. A commodity is often defined as a basic physical resource that can be traded, invested, or consumed. In the U.S., this means they are regulated by the CFTC. This involves different rules and regulatory approaches, focusing on market integrity, preventing manipulation and fraud, etc., rather than the registration and disclosure requirements of securities.

Summary: Crypto Assets are classified as securities or commodities, meaning they will face different regulatory structures and compliance requirements. This categorization affects how Crypto Assets are sold, traded, and held, as well as how related businesses operate. It is extremely important for investors and entrepreneurs to understand how Crypto Assets are regulated and what this means for their obligations and responsibilities.

Ethereum Spot ETF didn't have as much discussion and communication as Bitcoin Spot ETF had in the months that preceded it

Bloomberg's James Seyffart's main judgment (one of the big guys who predicted that Bitcoin Spot ETF would pass) was that the SEC didn't have as much communication with Ethereum Spot ETF applicants as they did in the months before and before the Bitcoin Spot ETF applications passed.

It's not a professional analysis.

Personal speculation:

1. Is there a possibility that most of the issues have been resolved in the months of intensive discussion in BTC Spot ETF, resulting in a high degree of duplication of material at the time of the issuer's application for Ethereum Spot ETF, so there is no need for long discussion
2. The SEC did not find strong evidence to refute it, just as it could not refute BTC Spot ETF passed
3. Ethereum's economic model is not an absolute deflationary model, not absolute Decentralization

Bitcoin's economic model of Halving the reward for reaching a certain number of blocks is an absolute deflationary model, and Ethereum is not.

As for the problem of Ethereum centralization, in the application materials of Ethereum Futures ETF, the only thing mentioned is the price Fluctuation caused by Ethereum Hard Fork and the Fluctuation of various financial products, in fact, I think this is a manifestation of the incomplete and incomplete research on Ethereum. Decentralization has a lot of weight on whether a product can be manipulated by the market

Reference: Valkyrie ETF Trust II

Ethereum's economic model is deflationary because each time a transaction occurs, a portion of the transaction fee is burned, resulting in a decrease in supply. If the volume on the Ethereum network continues to increase and transaction fees rise faster than the burn rate, then the total supply of Ethereum may begin to increase, i.e., there will be no more deflation. This can happen when there is increased network activity, Money Laundering pump, or other factors that cause the burn rate to not be fast enough to offset the new supply.

For example, the period from August 2023 to November 2023 is shown in the figure.

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If you dig Depth again, the matter of Ethereum PoW to PoS is not under the control of the SEC, but decided by the Ethereum Foundation led by Vitalik Buterin, and one of the Bitcoin extremes is the complete decentralization of the founding team, and I still don't know who the Satoshi Nakamoto are.

As a result, Ethereum can actually manipulate the progress of inflation/deflation in some ways, such as:

• EIP-1559 Change: EIP-1559 is a proposal on the Ethereum network that introduces the concept of a base fee and uses it to burn ETH. If changes are made to the implementation of EIP-1559 in the future, such as drop the burn ratio or eliminating the burn mechanism entirely, the supply of Ethereum will not be reduced.
• Changes in the additional issuance mechanism: The issuance volume of Ethereum is controlled by longing factors, including mining rewards, stake rewards, etc. If Ethereum's additional issuance mechanism changes in the future, such as increasing mining rewards or adjusting stake rewards, the supply of new ETH will increase, which may also stop Ethereum's deflationary trend.
• Technical or protocol Updates: Ethereum communities may update protocol through Hard Fork or Soft Fork that may affect the supply and destruction mechanisms of ETH. For example, if a new technology emerges that can drop Transaction Cost or change how Money Laundering is distributed, it could affect the supply of ETH.

Ironically, is LTC easier to pass?

• Both PoS and PoW are at risk of market manipulation, and there is no superiority or inferiority (and the less environmentally friendly PoW has already been passed)

Attestation of Stake (PoS) and PoW of Work (PoW) are two different Consensus Mechanisms that have their own characteristics in resisting market manipulation.

In a PoS system, validators must lock a certain amount of Token as collateral to participate in the generation and validation of blocks. If validators attempt to cheat or engage in malicious behavior, their staked tokens may be confiscated, which is known as "staking penalties." This mechanism could theoretically improve the integrity of validators because they have a greater financial incentive to maintain the security and stability of the network. As a result, PoS may be more difficult to suffer from a situation where a single entity controls the network through Computing Power than PoW in some cases.

However, PoS systems also face their own risks of manipulation. For example, if a validator or a handful of validators own a large number of collateralized tokens, they may gain disproportionate control over the network, which is known as "staking centralization." This centralization can lead to too much concentration of power, which increases the risk of manipulation. In addition, since validators in PoS systems are often rewarded with Money Laundering and/or new minting Token, this may attract wealthy individuals or entities to participate, further exacerbating the problem of centralization.

In PoW systems, Miners compete to generate new blocks by solving complex mathematical puzzles, a process that consumes a lot of computing resources and energy. Theoretically, PoW systems resist manipulation through a decentralized distribution of Computing Power, as any attempt to control most of the network's Computing Power would be very expensive and difficult to implement. However, if a group of miners (mining pools) controls more than 50% of the network's computing power, they have the ability to carry out double spending attacks, i.e., confirming two different transaction branches at the same time, thereby undermining the security and integrity of the network.

Overall, both PoS and PoW have their own advantages and disadvantages, and both have potential market manipulation risks. Which Consensus Mechanism to choose depends longer on the preferences of the community, the specific needs of the project, and the trade-offs between security and decentralization.

Of course, except for Ethereum, any project other than Bitcoin basically has a lack of Decentralization, and long people think that SOL will be the next one after Ethereum Spot ETF passes, but no one mentions that Solana Node are enterprise-level Node, and the possibility of evil is far greater than that of Ethereum, and this does not take into account that the possibility of evil in Ethereum is far greater than that of Bitcoin.

4. Gray

4.1 About the ETHE Latest Applications

Grayscale requirements:

• Allow ETHE redemption (to put it bluntly, it's Spot ETF)
• Allow Ethereum in trusts to be staked (this one is more aggressive)

14 A refers to the SEC's (SEC) Form 14 A, which is a specific form of document commonly known as a proxy statement. Companies must file this document with the SEC and send it to their shareholders in preparation for a shareholder meeting, or in connection with any matter that requires a shareholder vote. The proxy statement provides details about upcoming meetings and voting matters, including but not limited to:

• Members of the Board of Directors to be elected
• Information on the remuneration of executive officers
• Major decision-making proposals, such as mergers, acquisitions, changes to the company's articles of association, etc
• Voting guidelines recommended by the Board of Directors
• Information on corporate governance
• Potential conflicts of interest or other important information related to the company's management The purpose of the proxy statement is to ensure that shareholders have sufficient information when making voting decisions. This is a mechanism to protect the rights and interests of investors and ensure the transparency of corporate governance under the framework of U.S. securities laws. This transparency required by the SEC helps shareholders make informed decisions about the company

Grayscale's latest 14 A, GRAYSCALE ETHEREUM ETF enables trusts to stake Ethereum held by the trust and receive consideration associated with it for the ultimate benefit of ETHE shareholders.

ETHE is worth less than $10 billion (compared to the Bitcoin peak of grayscale market capitalization: 600,000 * 70,000 = $420 billion, and the current market capitalization: 350,000 * 70,000 = $245 billion), it can be seen that the impact of the passage of ETF Spot on the market may not be so drastic.

4.2 Bitcoin Holdings

Grayscale Bitcoin Holdings has dropped from 600,000 to 350,000.

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