Ether's 25% Surge: Impact of Anticipated U.S. Spot Ether ETF Approval on Prices
Summary:
Ether's price spiked by 25% between May 20-21, leading to uncertainties about the impact of an expected U.S. spot Ether exchange-traded fund (ETF). The U.S. Securities and Exchange Commission (SEC) appears inclined towards approval, but nothing has been officially declared. Analysts estimate a 75% chance of the spot ETF being approved. Observations on Bitcoin's trajectory after its ETF approval are being used to forecast Ether's potential behavior. However, the stability of Ether's price hints that ETF approval may already be incorporated in its current value.
Between May 20 and May 21, the cost of Ether (ETH) soared by 25%, hitting a nine-week peak of $3,840. This increase occurred despite some resistance and rising optimism about the U.S-based Ether exchange-traded fund (ETF) getting a green light by May 23. The U.S. regulators are to decide upon the ETF application made by the asset firm, VanEck. Current speculation among traders is whether the steadiness of Ether at $3,750 means that the ETF approval has already been factored into its price.
Signs of a potential approval of the spot ETH ETF have arisen as the U.S. Securities and Exchange Commission (SEC) has contacted the NYSE and Nasdaq to update their filings for the proposed Ether ETFs. While some perceive that this sudden curiosity from the SEC might stem from President Joe Biden aiming to gain favor from crypto enthusiasts, the SEC is yet to make an official statement. The SEC intends to have a discussion about this matter in the presence of five commissioners, two of which are known to be crypto advocates.
At the same time, the effects on the price of Ether might be anticipated based on the trajectory of Bitcoin (BTC) after it received approval for U.S. spot ETF in January. Post-approval, Bitcoin's price surged 35% over the subsequent 50 days, escalating from $46,356 to $62,416 by March 1. There are debates on whether the demand for Ether ETFs will equal Bitcoin's inflow of $7.37 billion recorded in the initial 50 days, considering the stiff rivalry posed by Grayscale’s $28.7 billion GBTC fund.
If the likelihood of Ether's ETF approval is pegged at 75% by market analysts, Ether's notable 25% price rally aligns with Bitcoin’s trajectory post-ETF approval. While Ether's cost might not be confined to $3,840, the projected approval chance corresponds to market estimations. Just like the BTC rally, Ether's rally didn't stop at 35%, it reached a fresh record high of $73,750 fourteen days later. Over time, market influences outside of these events grow.
Bitcoin's spot ETF approval coincided with an advantageous period for risk-prone assets. Assuming Ether follows a similar path might be overly simplistic under differing market scenarios, given external factors such as the S&P 500's record surge on March 12, and WTI prices finally surpassing $80 on March 14 after a four-month period.
By scrutinizing the Ether futures market, you can have an idea of how professional traders are positioned. Ideally, ETH futures should display an annual premium of 5% - 10%, showing contango market conditions. However, before May 20, key investors and market facilitators did not seem confident enough in Ether to justify an annual premium of over 10% for a long leveraged position. This points out that the current price of Ether does not wholly anticipate an approval, suggesting prospects for more gains. However, traders should always do their research as every investment and trading move in crypto carries its share of risk.
Published At
5/23/2024 12:13:43 AM
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