The US Securities and Exchange Commission (SEC) has approved spot Ether exchange-traded funds (ETFs). This has created a significant buzz in the crypto market. However, what many might have expected didn’t happen, Ether’s price has barely moved following this groundbreaking news—unlike when the likelihood of its approval pushed Ethereum’s price to a two month high.
Market Reaction Post-Approval
On May 23, the SEC approved eight spot Ether ETFs to be listed on their respective exchanges. Prior to the announcement, Ether (ETH) experienced a 3.4% drop but recovered by around 5% shortly after, trading at $3,806 at the time of writing. Despite the approval, Ether’s price did not exhibit a significant upward trend, reflecting a complex market reaction.
Crypto commentator Zach Rynes argues that the lack of significant movement post-approval reflects the notion that “everyone who wanted to buy the approval already did.” Ether had already surged 29% over the past week following reports that the SEC might approve the ETFs, indicating that the approval news was already priced in by the market.
Although the ETFs have been approved, they have not yet been cleared to launch. An approved S-1 filing, which includes comprehensive details on the firm’s financials and risk profile, is still required. VanEck has recently submitted its amended S-1 filing to the SEC, and analysts suggest it could take weeks to months for these filings to be approved. This delay means that the actual influx of new capital is still pending.
Future Expectations
The options market continues to show significant open interest in ETH options, particularly for expiry dates in late May. With open interest of $867 million for May 24 and $3.22 billion for May 31 on Deribit, the market remains bullish. If Ether’s price stays above $3,600, many put options will become worthless, favoring call options and potentially driving further bullish sentiment.
Crypto research firm Second Mountain anticipates a “massive capital inflow in the first week” following the ETFs’ launch, potentially reaching billions. However, the immediate impact might not result in a sharp upward trend, as seen with Bitcoin’s price after spot Bitcoin ETFs were approved earlier this year.
There are also concerns regarding Grayscale’s announcement of its plans to convert its Grayscale Ethereum Trust (ETHE) into a spot Ether ETF, which could lead to significant outflows. This mirrors the situation with the Grayscale Bitcoin Trust (GBTC) following the approval of spot Bitcoin ETFs, which saw substantial asset outflows.
The approval of spot Ether exchange-traded funds (ETFs) in the United States marks a significant milestone for Ethereum and the broader cryptocurrency market. This development is expected to boost Ether’s price, potentially driving it to $10,000 by the end of 2024, as suggested by Andrey Stoychev of Nexo. The SEC’s approval of these ETFs is seen as a positive shift, possibly influenced by political pressures and the upcoming U.S. presidential election.
Despite the initial market reaction being muted, with Ether’s price experiencing only modest fluctuations, the full impact of these ETFs will likely be realized once the required S-1 filings are approved and the ETFs are launched. Analysts predict that this could take weeks to months, but once operational, these ETFs are anticipated to attract substantial institutional investment and increase market liquidity.
As the market adjusts to this new development, investor confidence is expected to grow, leading to sustained positive momentum for Ether. The approval is a promising step towards greater adoption and integration of Ethereum into the financial mainstream, setting the stage for significant future growth.
Author: Makinde Adeniyi
The editorial team at #DisruptionBanking has taken all precautions to ensure that no persons or organisations have been adversely affected or offered any sort of financial advice in this article. This article is most definitely not financial advice.
