Why is Ether (ETH) price going up today?
Ethereum's native token, Ether (ETH), was fueled by speculation of an influx from institutional investors following the October 2 launch of an exchange-traded fund (ETF) linked to Ether futures on traditional stock market exchanges. Adoption of the Ethereum network by traditional financial institutions for real-world tokenized assets (RWA) has also had a positive impact on investor sentiment.
Between October 1 and October 2, Ether recorded a gain of 1.1%, its price reached the $1,700 defense level for the first time in a month.
Several Ethereum futures ETF instruments change the narrative
Eric Balhunas, senior ETF analyst at Bloomberg, expressed disappointment with the initial trading performance of Ethereum futures instruments in Extric 2, VanEek, ProShares, Valkyrie and BitWise, posted on the X social network (formerly Twitter).
As a group for Ether Futures ETFs, slightly under $2M, normal for a new ETF but low for $BITO (which made $200M in the first 15 minutes). Narrow competition bt VanEck and ProShares in single eth lane. pic.twitter.com/F9AHtrVcVf
— Eric Balchunas (@EricBalchunas) October 2, 2023
The data indicates that 64% of the trading volume in these futures instruments is from ETFs that provide exposure to Bitcoin (BTC) and Ether futures. VanEck's products are listed on the Chicago Board Options Exchange (CBOE), while ProShares and BitWise have chosen the New York Stock Exchange for their listings.
Despite the initial disappointment, Ethereum enthusiasts are excited about ETFs as they create a fully regulated investment vehicle for institutional investors who previously had no access to the cryptocurrency markets.
UBS chooses the Ethereum network for its token project
On October 2, Swiss bank UBS announced the launch of a live pilot for tokenized real world assets (RWA) on the Ethereum blockchain. Led by Singapore's central bank, the initiative involves issuing tokens representing shares of UBS Asset Management's money market fund.
This event further confirms the confidence of investors in the capabilities and security of the smart contract processing of the Ethereum network, which contributed to the positive progress in the price of Ether. The growing use cases for Ethereum, as it is essential for conducting transactions on the network, warrants a higher valuation for the native token.
Grayscale asked for Ethereum Trust (ETHE) conversion
Crypto asset manager Grayscale has filed an application with the US Securities and Exchange Commission (SEC) seeking approval to convert Ethereum Trust into an Ethereum ETF. The Grayscale Ethereum Trust (ETHE) was launched in March 2019 and currently has a net asset value of $4.9 billion, which is equivalent to 2,981,563 ETH held in the structure.
Investment trusts like ETHE are legally organized as companies and classified as “closed funds”. Hence, the supply of stocks is limited and their prices are largely determined by the dynamics of supply and demand. Because of this, the creation of ETE shares is not easily accessible, and there is no active redemption program in place. This situation often leads to large price differences compared to the price difference represented by the fractions of ETH held securely.
Short liquidations push the price of Ether to $1,755
The rise in Ethereum prices on October 1st coincided with $23 million worth of short liquidations of Ether futures contracts, while $2.4 million worth of long positions were liquidated in the same 12-hour period.
Short sellers were forced to close their positions by buying futures contracts at any price, which briefly rose to $1,755 on October 1, marking a 45-day high.
The correction to $1,680 on October 2 triggered the liquidation of $10.8 million of long positions, contributing to market volatility.
Finally, Ethereum bulls have reasons to feel more optimistic as a new way of investing through traditional stock market brokerages emerges, with the increasing potential of virtual assets on the Ethereum blockchain.
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This article is not intended for general information purposes and should not be construed as legal or investment advice. The views, ideas and opinions expressed herein are solely those of the author and do not necessarily represent the views and opinions of Cointelegraph.
