Ethereum
Is ETH heading for a bull run? By Investing.com
The U.S. Securities and Exchange Commission (SEC) approved the first spot (ETH) exchange-traded funds (ETFs) last week. The price of Ethereum surged in anticipation of the move, with crypto experts now saying the bull run has just begun.
The wave of positive regulatory news didn’t stop there as the House of Representatives passed its first crypto bill and the UK gave the green light to exchange-traded crypto products.
Signs that approval was imminent emerged earlier in the week when several exchanges changed their filings to exclude staking.
According to the latest analysis from Kaiko Research, the market has been gradually weighing approval for an ETF over the past month, amid growing uncertainty over the regulatory status of ETH.
“With these approvals, the SEC has implicitly declared that (non-staking) ETH is a commodity rather than a security. This is not just about access to ETH, but it has significant and likely positive ramifications for how all similar tokens will be regulated in the United States with regards to trading, custody, transfer , etc. », added Kaiko Research.
ETH implied volatility for the nearest expiration increased from less than 60% on May 20 to almost 90% on May 22 before retreating by the end of the week. This radical change in sentiment has also manifested itself in derivatives markets.
Ethereum price hit a 2-month high on Monday as bulls attempt to breach the strong resistance zone surrounding the $4,000 level.
“For a long time, Ethereum has been stuck between narratives, often chasing trends. We are finally seeing its relative market share catch up with its fundamentals. Bull runs are fueled by attention, inflows and narratives, and Ethereum has been scoring on all three fronts lately,” Kiril Nikolov, DeFi strategist at Nexo, told Investing.com.
Nikolov predicts that “inflows will be at least proportional to the market capitalization of the asset in terms of size, or about 30-40% of those achieved by spot ETFs in the United States.”
“As long as inflows exceed grayscale outflows, the rest of the year could be incredible for Ethereum.”
A break above the 2024 high would open the door for a rapid move towards the all-time high, set in 2021. The next resistance zone is located near the $6,000 level.
Open Interest Hits New Record
In just three days, ETH perpetual futures funding rates fell from their lowest level in over a year to a multi-month high. Open interest also hit an all-time high of $11 billion, suggesting strong capital inflows into the space.
The ETH/BTC ratio, measuring the relative performance of the two assets, increased from 0.044 to 0.055, although it remains below February highs. The rally has been broad-based, with U.S. and foreign cash markets seeing strong net buying since May 21. Offshore exchanges had previously recorded net sales.
Going forward, the launch of ETH ETFs could lead to selling pressure due to likely outflows or redemptions due to Grayscale’s ETHE, which has been trading at a discount of between 6% and 26% at the over the last three months.
ETHE currently has over $11 billion in assets under management, making it the largest ETH investment vehicle. In the first month of Bitcoin ETF trading, GBTC saw outflows amounting to $6.5 billion, or approximately 23% of its launch day assets under management.
If outflows of a similar magnitude occurred with ETHE, this would result in $110 million in average daily outflows, or 30% of the average daily volume of ETH on Coinbase (NASDAQ:). However, outflows from GBTC were offset and exceeded by inflows from other BTC ETFs at the end of January.
“The overall impact of ETHE redemptions on the market is still uncertain, especially given the lackluster launch of Hong Kong ETFs,” Kaiko Research said.
“Additionally, ETH market depth on centralized exchanges is around $226 million, still 42% lower than its pre-FTX average levels, and only 40% is concentrated on US exchanges , compared to around 50% at the start of 2023.”