Last week marked a significant milestone in the cryptocurrency world as the U.S. Securities and Exchange Commission (SEC) greenlit the inaugural spot Ethereum (ETH) exchange-traded funds (ETFs). The anticipation leading up to this decision propelled Ethereum’s price to soar, prompting crypto experts to declare the commencement of a bullish trend.
But the wave of positive regulatory developments didn’t halt with the SEC’s approval. The House of Representatives also passed its inaugural crypto bill, while the UK granted approval for crypto exchange-traded products, signaling a broader acceptance and recognition of digital assets.
Hints of an impending approval surfaced earlier in the week when various exchanges revised their filings to exclude staking. This move, according to Kaiko Research’s recent analysis, coincided with the market gradually pricing in the likelihood of an ETF approval over the past month amidst mounting uncertainty surrounding ETH‘s regulatory status.
In response to these approvals, Kaiko Research noted that the SEC effectively designated ETH (without staking) as a commodity rather than a security. This determination holds profound implications not only for Ethereum’s accessibility but also for the regulatory treatment of similar tokens in the U.S., spanning trading, custody, and transfer activities.
The surge in ETH implied volatility, from less than 60% on May 20 to nearly 90% on May 22 before moderating by week’s end, mirrored the dramatic shift in sentiment observed across derivatives markets.
On the price front, Ethereum surged to a two-month high on Monday, as bullish momentum aimed to breach the formidable resistance zone encircling the $4,000 level. Kiril Nikolov, DeFi Strategist at Nexo, highlighted Ethereum’s recent resurgence, attributing it to a convergence of attention, inflows, and favorable narratives.
Nikolov anticipates that inflows into Ethereum ETFs could mirror a significant proportion of those observed in spot Bitcoin ETFs in the U.S., potentially driving substantial gains for Ethereum throughout the remainder of the year.
Looking ahead, a breakthrough above the 2024 high could propel Ethereum towards its all-time record high set in 2021, with the next resistance zone positioned near the $6,000 mark.
Furthermore, the surge in open interest to an all-time high of $11 billion, coupled with the robust performance of ETH relative to BTC and strong net buying activity across U.S. and offshore spot markets since May 21, underscored the broad-based rally witnessed in Ethereum’s market.
Nevertheless, concerns loom over potential selling pressure resulting from outflows or redemptions from Grayscale’s Ethereum Trust (ETHE), which has been trading at a discount over the past few months. The magnitude and ramifications of such outflows remain uncertain, particularly in light of the lackluster debut of Hong Kong ETFs and Ethereum’s market depth on centralized exchanges.
As Ethereum ETFs make their market debut, investors remain poised to navigate the evolving dynamics of the cryptocurrency landscape, where regulatory developments and market sentiment continue to shape the trajectory of digital assets.
