Ethereum rally stalls at $3.8K – SEC ETH ETF decision already priced in?
The price of Ether (ETH) increased by 25% between May 20 and May 21, reaching a nine-week high of $3,840. However, the altcoin has faced resistance despite growing confidence in the May 23 deadline for US spot ether exchange-traded fund (ETF) approval. That's when supervisors decide on the application from property manager VanEck. The stability around $3,750 has traders now considering whether the approval of the Ether ETF has already been factored into the price.
Pending the SEC's decision on the spot, the ETH ETF remains in the game
The US Securities and Exchange Commission (SEC) is meeting with the NYSE and Nasdaq to update their 19b-4 filings for the proposed space ether ETF, analysts said, raising expectations. Crypto lawyer Jake Chervinsky pointed out that this sudden demand from the regulator stems from political motives, as US President Joe Biden wants to appeal to cryptocurrency supporters.
However, there is still no official word from the SEC, which plans to vote on the matter on a panel of five commissioners. Two of them are particularly pro-crypto: Hester Peirce and Mark Uyeda. On the other hand, Caroline Crenshaw of the SEC is very vocal about the cryptocurrency sector, especially known as insufficient regulation and risks of fraud and fraud.
Investors may be assessing the potential impact on the price of Ether based on the direction of Bitcoin (BTC) following the approval of the US spot ETF in January. Bitcoin surged 35 percent in the 50 days following the announcement, rising from $46,356 to $62,416 on March 1. It is debatable whether Ether ETF demand will reach the $7.37 billion inflows that Bitcoin experienced in its first 50 days. Competition from Greyscale's $28.7 billion GBTC fund.
With analysts giving a 75% chance of the Ether ETF being approved, the recent 25% increase in the ETH price correlates with Bitcoin's post-ETF approval. This does not mean that the price of Ether is limited to $3,840, but it does indicate that the probability of its approval is in line with market expectations. Likewise, Bitcoin's rally didn't stop with a 35% gain as it hit a new all-time high of $73,750 two weeks later. However, as time passes from such events, external factors affect the market.
For example, the S&P 500 index hit a record high on March 12, and WTI prices finally fell above $80 on March 14, four months later. The approval of Bitcoin's US spot ETF comes at a particularly favorable time for risk assets. While it's uncertain what Bitcoin's performance might be under different market conditions, it's easy to imagine a similar trajectory for Ether.
Related: Strong Bitcoin ETF Earnings Boost BTC Stability, Bitfinex Says
Measurements of ether extracts are far from euphoric.
It is useful to examine the Ether futures market to gauge how professional traders are positioned. Typically, ETH futures should exhibit an annual premium of 5% to 10%, a market condition commonly known as contango in financial markets.
Evidence suggests that prior to May 20, major investors and market makers were unsure of Ether's performance, at least not enough to justify an annual premium of more than 10% for an authorized long position. A jump to a 15% premium indicates modest appetite among bulls, but this is still a far cry from the 20% to 27% seen in March.
The metrics derived from the variables suggest that Ether traders are not overly optimistic or fully pricing in the prospects of the US Spot Ether ETF being approved. For ETH bears, this will greatly reduce the potential negative impact, as there is no excessive use of leverage among buyers. Ultimately, Ether's current price does not fully reflect the expectation of approval, indicating the potential for further gains.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
