JPMorgan: Crypto Market Still Faces Downside Risks, SEC to Ultimately Approve Ethereum Spot ETF

According to a report by The Block, analysts at JPMorgan have warned that despite the rebound in the cryptocurrency market this year, funding for crypto-related venture capital remains subdued, posing potential downside risks. The likelihood of an Ethereum spot ETF being approved in May is no more than 50%, however, the U.S. Securities and Exchange Commission (SEC) is expected to ultimately approve such funds.

Insufficient Investment in Cryptocurrency Venture Capital

According to a report released by JPMorgan Chase analysts on Thursday, various alternative indicators used by JPMorgan Chase to gauge the flow of venture capital into the cryptocurrency sector appear to be relatively subdued compared to previous years.

The flow of venture capital into the cryptocurrency sector is essential for the continuous recovery of the cryptocurrency market, therefore the lackluster venture capital flow since the beginning of the year poses a downside risk.

Although venture capital in the cryptocurrency sector seems to be slowly recovering this year, it still lags behind previous years. According to Block Pro's trading dashboard, the cryptocurrency industry has attracted $3.2 billion in venture capital so far this year, whereas venture capital in the first four months of last year exceeded $4 billion.

The JPMorgan Chase analysts noted that while venture capital seems to be slowly rebounding, cryptocurrency hedge funds have been more active this year, with assets under management increasing significantly over the past six months, estimated at around $20 billion.

SEC Likely to Approve Ethereum Spot ETF

JPMorgan Chase also mentioned in the report that the likelihood of an Ethereum spot ETF approval in May does not exceed 50%, but the U.S. Securities and Exchange Commission (SEC) is ultimately expected to approve such funds.

Following the SEC's investigation into the Ethereum Foundation, market optimism for the approval of the Ethereum spot ETF on May 23 seems to have waned, as evidenced by the Grayscale Ethereum Trust Fund (ETHE) discount widening from 8% in early March to 23%.

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