PARIS — Issuers of spot bitcoin exchange-traded funds on Tuesday say the U.S. Securities and Exchange Commission is unlikely to approve such a product for the cryptocurrency ether.

The regulator has a late-May deadline to conclude its review on an ether ETF. That comes after the SEC in March delayed its original deadline for a decision on the ether ETF application.

Companies ranging from BlackRock to Fidelity and VanEck, which issued spot bitcoin ETFs this year, have been waiting for approval for an ether product.

Some issuers are not confident that the SEC will green light the ether applications.

“We were the first to file as well for Ethereum in the U.S., and we and [Ark Invest CEO] Cathy Wood, are kind of the first in line for May, I guess, to probably be rejected,” VanEck CEO Jan Van Eck told CNBC’s Arjun Kharpal at the Paris Blockchain Week crypto event in Paris, France.

Ark Invest was not immediately available for comment when contacted by CNBC.

“The way the legal process goes is the regulators will give you comments on your application, and that happened for weeks and weeks before the Bitcoin ETFs — and right now, pins are dropping as far as Ethereum is concerned,” Van Eck added.

Enthusiasm has been mounting among the crypto community for an ether ETF, ever since the SEC approved the first spot bitcoin ETFs in January.

The ether price has been climbing this past week on the back of hopes that the SEC will approve an ether-backed ETF.

The token is up about 10% in the last seven days, according to CoinGecko data.

However, the SEC has signaled that it might not be so willing to approve such an investment product.

SEC Chair Gary Gensler has previously stressed that “the vast majority of crypto assets are investment contracts and thus subject to the federal securities laws,” in the SEC’s view.

This complicates matters for an ether ETF.

“We are observing the Ethereum decision very, very closely,” CoinShares CEO Jean-Marie Mognetti told CNBC on Tuesday. “CoinShares was not in the race for the bitcoin ETF until three months before the approval, and we managed to qualify ourselves at the last minute.”

He was equally pessimistic over the odds of gaining such an approval in the short term.

CoinShares is not one of the companies in the running for an ether ETF in the U.S.

“I don’t see anything being approved this side of the year,” he noted, suggesting it may be difficult to gain SEC approval for proof of stake — a protocol specific to blockchain.

Bitcoin is underpinned by a different protocol, known as proof of work, where volunteer miners validate transactions and mint new tokens.

The SEC has not taken issue with proof of work from a securities law standpoint.

Bitcoin extended its slide on Tuesday, dropping more than $10,000 from its all-time high last week.

The flagship cryptocurrency was last lower by 5% at $63,460.33, according to Coin Metrics. Last week, it climbed to a record $73,679.

The move helped drag other cryptocurrencies lower. Ether lost more than 5% and was recently trading at $3,287.58 after topping $4,000 last week for the first time since December 2021, a drop some analysts predicted following the network’s Dencun upgrade. The token tied to Solana fell 8%, dogecoin lost 7% and XRP slipped 2%.

Among crypto-related stocks, bitcoin proxy MicroStrategy tumbled 10%, while crypto exchange Coinbase fell 5%. Mining stocks were down across the board, with the biggest ones, Riot Platforms and Marathon Digital, lower by 6% and 5%, respectively.

Bitcoin weakness began last week as traders started taking profits after it had soared roughly 70% from the start of the year to its peak last Wednesday. Data from CryptoQuant shows a massive spike in investors selling their bitcoin at a profit on March 12.

Additionally, that profit-taking led to a spike in long liquidations of leveraged bitcoin positions. About $122 million in long liquidations occurred across centralized exchanges on Monday, according to CoinGlass. Last week, there was about $372 million in long liquidations from Wednesday to Friday.

The successful introduction of spot bitcoin exchange-traded funds in the U.S. earlier this year has been a key contributor to bitcoin’s rally, which began even before the ETFs were launched in anticipation of their regulatory approval. At the same time, interest from investors and higher demand for bitcoin have also led to increased leverage and heightened high-frequency volatility.

Investors and analysts have warned that traders should exercise caution in March as more volatile price action, combined with an increase in trading volumes, would lead to pullbacks from bitcoin’s long-term uptrend.

Chart watchers have mostly said bitcoin is on a path to new highs but could also see steep corrections along the way.

Cryptocurrencies resumed their sell-off Friday as FTX announced it has filed for Chapter 11 bankruptcy in the U.S.

Bitcoin fell 3%, to $16,915.38, while ether lost 2%, to $1,276.66, according to Coin Metrics. They’re down 21% and 25%, respectively, for the week.

FTX CEO Sam Bankman-Fried has also resigned, according to a statement posted to FTX’s Twitter account Friday.

Bankman-Fried became a so-called white knight for the industry, helping bring crypto to the masses through his relationships with high-profile celebrities, regulators and institutions in addition to his exchange product.

Investors are monitoring the fallout from the three-year-old FTX and its sister company, trading firm Alameda Research, still unclear on the extent of the damage that will spread to the rest of the market.

About 130 additional global companies, including Alameda and FTX U.S., have also begun the bankruptcy process.

Some of the biggest names in finance — including SoftBank, BlackRock, Tiger Global, Thoma Bravo, Sequoia and Paradigm — invested in FTX, which was valued at $32 billion during its last funding round.

“We are in the midst of another deleveraging event in the crypto ecosystem and it is so far having limited spillover to broader equity markets beyond sentiment, as crypto institutions lent to each other,” Morgan Stanley analyst Sheena Shah said in a note Friday.

“We expect another round of crypto QT” — or what the firm has previously described as the “crypto equivalent of quantitative tightening” — “with creditor exposures revealed in coming weeks,” she added. “These creditors are currently selling crypto assets to cover risks, adding to volatility.”

Ether has fallen more than bitcoin since the cryptocurrency’s underlying technology, the Ethereum network, underwent a huge upgrade called “the merge.”

Ethereum is a blockchain technology that effectively allows developers to build apps on top of it. Ether is the native cryptocurrency that runs on Ethereum.

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The merge is an upgrade to Ethereum that changes the validation mechanism for transactions from a proof-of-work method to proof-of-stake. Proponents say this will make validating transactions on Ethereum much more energy efficient. It has been eagerly anticipated by the crypto community.

Despite the upgrade happening successfully, ether has fallen more than bitcoin.

Since Sept. 15, the date the merge was completed, to around 4:30 a.m ET on Tuesday, ether is down around 15%. Bitcoin has dropped around 4% in the same period.

Ahead of the network upgrade, the price of ether roughly doubled from the lows of the year in June, far outpacing bitcoin’s gains.

Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, said that the merge was already “priced in” for ether and the “actual event was a ‘sell the news’ situation.”

Traders are also shifting investments from ether and other alternative digital coins back into bitcoin, according to Ayyar, “since the expectation is that Bitcoin will outperform for a few months from here on.”

Investors are also wondering whether the regulatory standing of ether may change after the merge after U.S. Securities and Exchange Commission Chair Gary Gensler indicated last week that cryptocurrencies that work on the proof-of-stake model, which applies to Ethereum, could be classed as a security. That would bring it under the purview of the regulators.

Gensler, whose comments were reported by several news outlets, did not name ether specifically. The proof-of-stake model involves investors “staking” or locking up their ether and earning returns for doing so.

“For Ethereum, there is another concern: PoS (proof-of-stake) crypto may fall under SEC’s scrutiny,” said Yuya Hasegawa, crypto market analyst at Japanese crypto exchange Bitbank.

Crypto investors are also on edge ahead of an expected interest rate hike from the U.S. Federal Reserve this week.

Central banks around the world have been raising interest rates to deal with rampant inflation. But that has hurt risk assets such as stocks. Cryptocurrencies have been closely correlated with U.S. stock markets, in particular the tech-heavy Nasdaq. With stocks remaining under pressure, crypto has also felt the heat.

Inflation in the U.S. in August came in higher than expected, which hit stocks and crypto.

“From a macro perspective as well, inflation did come in higher, and hence caused a sell off across all markets, but ethereum and altcoins did sell off harder, given they’re along the more risky part of the crypto spectrum,” Ayyar said.

Bitcoin has been trading in a range of about $18,000 to $25,000 since June, a level at which investors are buying in, according to Ayyar.

But any “change in the macro environment in terms of inflation of interest rate surprises, is definitely cause for concern,” he said, adding that if bitcoin falls below $18,000, the cryptocurrency could test levels as low as $14,000.

Bitcoin on Friday fell to its lowest level in more than three weeks, dipping below $22,000 amid a sudden crypto sell-off in early European trading. 

Bitcoin plunged from $22,738 to below $21,427.59 at 10:20 a.m. ET, according to CoinDesk data. Earlier in the morning, the cryptocurrency fluctuated between $21,500 and $22,000.

It comes shortly after the world’s largest digital coin surpassed the $25,000 level for the first time since June following a rise in U.S. stocks.

Ether fell from $1,808 to $1,728 at the same time before staging a muted rebound. It had slipped again, falling further to $1,693.90 by 9:40 a.m. ET.

A specific cause for a drop at that time, which also sent Binance Coin, Cardano and Solana falling, was not immediately clear. 

“It’s not showing the pattern of a flash crash, as the assets didn’t immediately rebound sharply but sank even lower in the hours that followed,” said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. “It seems likely that is was as a result of a large sale transaction, in the absence of other more external factors.”

Streeter said it appeared Cardano made the first plunge downwards, followed by Bitcoin and Ether and then smaller coins like Dogecoin.

“This fresh chill has descended amid fears that the market is heading for a crypto winter,” she added. “Although at $21,800 Bitcoin is still some way off its June lows of under $19,000, volatility is once again wracking the market.”

The digital coins may also be following equities lower.

“US equity markets have pulled back since Wednesday’s release of the July Fed meeting minutes, the key takeaway being that the Fed likely won’t be finished with rate hikes until inflation is tamed across the board, with no guidance offered on future rate increases either,” Simon Peters, crypto market analyst at eToro, told CNBC.

“With the tight correlation between US equities and crypto in recent months I suspect this has filtered through to crypto markets and it’s why we are seeing the sell-off. The trend has also perhaps been exacerbated by liquidation of long positions on bitcoin perpetual futures markets.”

Citing Coinglass data, Peters said Friday had been the biggest liquidation of long positions on futures since June 18, also the date bitcoin reached its lowest price of the year around $17,500.

Bitcoin and ether ended Thursday in the red, but ether has surged more than 100% since mid-June as investors prepare for a massive upgrade to the ethereum network.

Bitcoin jumped 6% on Monday after a sharp sell-off over the weekend but continues to teeter around the $20,000 mark, keeping investors on edge.

The world’s largest cryptocurrency was trading at $20,770.63 at 07:58 a.m. ET, according to data from CoinDesk. In the last 24 hours, bitcoin had risen sharply above $20,000 and fallen as low as $19,129.70.

Over the weekend, bitcoin had fallen as low as $17,601.58.

Meanwhile, ether jumped more than 9% and was trading above $1,152.31 at 07:58 a.m. ET, according to CoinDesk data.

While the rebound will be welcome by investors, bitcoin still sits around 70% below its all-time high hit in November last year and is down 57% year-to-date.

With bitcoin unable to hold convincingly above $20,000, industry watchers said the rally might be short-lived.

Vijay Ayyar, vice president of corporate development and international at crypto exchange Luno, told CNBC that unless the price of bitcoin closes above $23,000 on a daily time frame basis, “the odds are this is a dead cat bounce.”

“We’re oversold, so a bounce was expected,” he said.

The broader cryptocurrency market has been plagued by a number of issues in recent weeks, beginning with the collapse of algorithmic stablecoin terraUSD and associated token luna.

Attention has now turned to crypto lending companies that promise users high yields for depositing their digital coins. Last week, Celsius, a company with 1.7 million customers and nearly $12 billion of crypto assets under management, paused withdrawal of funds for customers, sparking concerns that it is insolvent.

Cryptocurrency companies have announced rounds of layoffs amid the market downturn. Coinbase, a crypto wallet and exchange, said last week it will cut 18% of full-time jobs. A lending firm called BlockFi said last week it will lay off a fifth of its staff.

Macroeconomic factors including high inflation and upcoming rate hikes from the U.S. Federal Reserve are also weighing on the market.

“When inflation is on the doorstep and with rate hikes in the offing, the risks of a recession round the bend are high,” Charles Hayter, CEO of CryptoCompare, told CNBC via email.

“The push me pull you of higher rates sapping cash from mortgaged house owners means people are psychologically bracing and paring back and digital assets are suffering thus.”

“Coupled with this, the pull back in the digital asset ecosystem has uncovered a number of systemic issues.”

Given the big fall in cryptocurrency prices in the last few weeks, some observers said that a bottom to the market could be close.

Giles Keating, director of Bitcoin Suisse, told CNBC’s “Squawk Box Europe” on Monday that “we’re close to a point where some of the real excess leverage has now been driven out of the system and a bottom can begin to be formed.”

Leverage refers to trading in which investors effectively use borrowed money to make trades. That means investors can get larger exposure to positions with less initial capital. But that’s seen as a risky means of trading as it requires investors to ensure they have enough capital to meet the so-called margin requirements. If they don’t, their position is automatically liquidated. Those liquidations are seen as a big factor behind market moves.

Keating said there is still a risk of further liquidation, but he thinks the majority of the selling is over.

“Now some people are warning that we are still not yet there and that if we were to break significantly lower, that we’d see another wave of liquidations,” Keating said.

“There’s always that risk hovering there. But my feeling, given I think those very very big double digit rebounds we saw, in bitcoin, particularly in ether, I think to my mind that was a sign that a lot of those really big liquidations are now done and that the base really is being formed.”