In the past 48 hours, the price of Ethereum (ETH) surged, propelled by promising regulatory advancements that signal a forthcoming approval of an ether exchange-traded fund (ETF).
However, despite the optimism, a recent report from Citi suggests that the likelihood of a significant “buy the rumor, sell the fact” reaction for ETH appears diminished compared to Bitcoin.
Citing the aftermath of Bitcoin‘s 17% decline post-ETF approval due to speculative fervor and leveraged positions, Citi contrasts this with the situation surrounding ETH. The report highlights the relatively subdued anticipation and positioning ahead of a potential ETH ETF approval.
According to the report, Ethereum futures open interest (OI) and funding rates remained restrained following the release of these findings. Nonetheless, a gradual uptick in OI signals mounting expectations surrounding an ETF green light.
The narrative further delves into the pivotal role of ETF inflows in influencing cryptocurrency returns, particularly evident in Bitcoin’s performance post-ETF launches. With ETH ETFs on the horizon, continued significance of crypto ETF flows is anticipated, shaping overall market dynamics.
Behind-the-scenes dialogues between regulators and ETF providers, involving nine firms with pending applications, fuel speculation of forthcoming ETH ETF launches, in line with past Bitcoin ETF approvals.
Drawing on historical data, Citi underscores the substantial impact of net flows into spot Bitcoin ETFs on crypto returns, setting a precedent for ETH. Projections estimate inflows ranging from $3.8 billion to $4.5 billion, potentially driving ETH prices up by 23-28%.
However, various factors could influence these estimates, including differing demand dynamics between ETH and BTC, potential rotations among ETF holders, and pre-approval positioning fluctuations.
In the long run, Citi analysts anticipate sustained high correlation between Bitcoin and Ethereum, driven by overarching macroeconomic factors. Despite distinct on-chain activities and use-case potentials, sentiment, adoption rates, and further development of use-cases remain pivotal for both cryptocurrencies.
In conclusion, the Citi memo foresees continued macro-driven correlation between major tokens, emphasizing the enduring significance of broader market forces in shaping the trajectory of Bitcoin and Ethereum.
