- May 24, 2024
- Posted by: [email protected]
- Category:
The potential approval of spot Ethereum exchange-traded funds (ETFs) in the United States could trigger a substantial rally in the price of ETH, with forecasts suggesting an increase of up to 60%. This prediction comes from Singapore-based QCP Capital, which drew parallels to the market reaction following the approval of spot Bitcoin ETFs earlier this year. The approval of these Bitcoin ETFs saw Bitcoin surge from $42,000 to over $73,000 within a two-week period, setting a precedent that could similarly impact Ethereum.
QCP Capital noted that the current market conditions, reflected by an implied volatility above 100%, suggest that significant price movements are anticipated. This heightened volatility indicates that traders are expecting considerable fluctuations in ETH prices. Furthermore, VanEck’s ETF being listed by the Depository Trust & Clearing Corporation (DTCC) implies that approval for spot Ether ETFs is highly probable, with trading expected to commence imminently, possibly as early as next week.
Implied volatility is a critical measure reflecting the market’s expectations of future price movements for financial instruments. The elevated implied volatility in the current market underscores strong expectations for a significant price reaction to the potential approval of spot Ether ETFs.
Supporting this anticipation, on-chain analytics firm CryptoQuant reported a significant increase in buying activity on both centralized and blockchain-based crypto exchanges. On Tuesday, holders purchased over 100,000 ETH in spot markets, marking the highest daily purchase level since September 2023. This surge in buying activity coincided with reports of a likely favorable decision regarding spot Ether ETFs, prompting some analysts to raise the odds of approval to over 75%, up from an earlier estimate of 25%.
Additionally, open interest in Ethereum-tracked futures reached a record high of $14 billion, accounting for 67% of Bitcoin’s open interest as of Wednesday. This surge indicates that traders are increasingly positioning themselves in Ether relative to Bitcoin, anticipating significant price movements. The substantial buying activity from ETH permanent holders on that day was the largest observed in 2024, reflecting strong confidence in Ethereum’s future prospects.
However, QCP Capital’s analysts cautioned that if the ETF application were to be dismissed, a “significant price correction” could occur, highlighting the potential volatility and uncertainty surrounding the approval decision. This reminder serves as a critical note of caution for investors about the inherent risks involved.
In preparation for the regulatory decision, six issuers, including BlackRock, recently filed updated copies of their Ether ETF proposals, notably removing plans to stake the token. This change suggests that staking activities might have posed regulatory challenges. As of Thursday, data from popular staking service Lido indicated that annualized yields on Ether staking were nearly 3%, underscoring the potential value and income-generating opportunities associated with staking activities.
Further bolstering these developments, Fidelity submitted an amended S-1 application to the SEC for its spot Ether ETF, specifying that the underlying Ether tokens will not be staked. This move aligns with the trend of addressing regulatory concerns by avoiding staking activities within ETF structures.
The potential approval of spot Ether ETFs in the U.S. is poised to significantly impact Ethereum’s price, possibly driving a substantial rally. The market’s heightened implied volatility, increased buying activity, and strategic adjustments by ETF issuers all point to a pivotal moment for Ethereum, with substantial opportunities and risks on the horizon. Investors should remain vigilant and prepared for potential market shifts as the regulatory decision approaches.
