ETF speculation is driving up volatility and traders are eyeing $5,000. The SEC’s pivot lifts Ether 26% in a week.
TakeAway Points:
- Following the SEC’s decision to permit Ether ETFs, Ether saw a 26% weekly increase, the largest weekly gain since 2021.
- Spot-Ether exchange-traded funds (ETFs) may be less appealing than direct token ownership because they do not provide staking, despite the hype.
- Although traders anticipate Ether hitting $5,000, institutional interest in the cryptocurrency is still lower than that of Bitcoin, according to bullish options bets.
Ether ETF Surge
The US Securities & Exchange Commission (SEC) made a surprising regulatory turn towards permitting exchange-traded funds (ETFs) for ether, which has increased bets on further rises in the digital asset.
According to Bloomberg’s research, this change was the driving force behind Ether’s 26% weekly increase, the second-largest coin since the 2021 crypto bull market. With $59 billion in assets, US spot-Bitcoin ETFs debuted in January with a record amount of enthusiasm, and the SEC’s action has encouraged speculators in a similar manner.
However, the report stated that it is more difficult to determine investor desire for these new goods due to Ether’s relative obscurity in comparison to Bitcoin. Furthermore, spot-Ether ETFs will not engage in staking, which is a method of maintaining the Ethereum blockchain by committing tokens in exchange for rewards.
In comparison to holding the tokens directly, this omission may reduce interest in the funds. Further SEC approvals are still needed before issuers like BlackRock Inc. and Fidelity Investments may debut these products, and the timetable for these approvals remains unknown. Ether increased by over 1% to $3,900 as of 8:38 a.m. on Monday in London, while Bitcoin stayed largely unchanged at $68,500.
Market Speculation and Sentiment
Chris Weston, Head of Research at Pepperstone Group, wrote in a note that “the risk in Ether remains to the upside and pullbacks are a buying opportunity.”
Figures from the Deribit trading platform show that some traders expect Ether to rise to $5,000 or even higher based on the biggest concentrations of optimistic options bets. The spot-Ether record that was set in November 2021 is $4,866.
Additionally, traders anticipate far greater fluctuations in Ether than in Bitcoin. The difference between a similar gauge for Bitcoin and the T3 Ether Volatility Index, which measures projected 30-day fluctuations in the token using options pricing, is about as large as it has been since at least the beginning of 2023. This suggests that, in contrast to the biggest digital asset, traders are expecting Ether to be more volatile.
Regulatory Environment and Institutional Demand
The demand for futures offered by Chicago-based CME Group Inc. is seen by some analysts as a sign of institutional interest in regulated cryptocurrency exposure in the US.
CME Ether futures have a growing amount of open interest, or outstanding contracts, but they still have a significantly lower amount than CME Bitcoin futures. This implies a lower level of institutional interest in ether and, thus, in the potential ether exchange-traded funds.
“The relatively low participation from the same institutions that will probably be expected to pour into the Ether spot ETF upon launch, suggests that the initial inflows could be disappointing,” wrote Noelle Acheson, author of the Crypto Is Macro Now newsletter.
