ETH News: Ethereum Rally Hits a Ceiling at $3.8K — Is the SEC’s ETH ETF Decision Already Reflected in the Price?

ETH News: Ethereum Caps at $3.8K — Is the SEC’s ETF Decision Already in the Price?

Crypto News- Between May 20 and May 21, Ether’s price surged by 25%, reaching a nine-week high of $3,840. Despite this significant increase, the cryptocurrency encountered resistance, even as optimism grew regarding the approval of a U.S.-based spot Ether ETF by the May 23 deadline. The decision on this application from asset manager VanEck rests with regulators. Traders are now speculating whether the stabilization around $3,750 indicates that the potential ETF approval has already been priced in.

SEC Decision on Spot ETH ETF Looms

Analysts have raised their expectations for approval after reports emerged that the U.S. Securities and Exchange Commission (SEC) had reached out to the New York Stock Exchange and the Nasdaq, requesting updates to their 19b-4 filings for the proposed spot Ether ETFs. Crypto lawyer Jake Chervinsky suggested that this sudden regulatory interest could be politically motivated, possibly reflecting U.S. President Joe Biden’s desire to appeal to cryptocurrency supporters.

However, the SEC has yet to make an official announcement. The decision will be made by a panel of five commissioners, including two known crypto advocates, Hester Peirce and Mark Uyeda. Conversely, Caroline Crenshaw, a vocal critic of the crypto sector, is expected to oppose the approval due to concerns over regulation and the risk of fraud and manipulation.

Ether Price Speculation Based on Bitcoin’s ETF Experience

Investors may look to Bitcoin’s price movement following its U.S. spot ETF approval in January as a potential indicator for Ether. After Bitcoin’s ETF approval, its price increased by 35% over 50 days, from $46,356 to $62,416 by March 1. The demand for Ether ETFs might not match the $7.37 billion inflow Bitcoin saw in its first 50 days, considering Grayscale’s substantial $28.7 billion Bitcoin Trust ETF.

With analysts assigning a 75% probability to the approval of spot Ether ETFs, the recent 25% rise in ETH’s price seems to mirror Bitcoin’s post-ETF approval trend. While this doesn’t cap Ether’s potential at $3,840, it does suggest that the market has largely accounted for the likelihood of approval. Similar to Bitcoin, whose rally continued beyond a 35% gain to reach a new all-time high of $73,750, Ether could see further gains, though external factors will increasingly influence the market as time goes on.

For example, the S&P 500 index hit a record high on March 12, and WTI crude prices surpassed $80 on March 14, suggesting a favorable period for risk-on assets coinciding with Bitcoin’s ETF approval. It’s uncertain how Bitcoin would have performed under different conditions, and assuming Ether will follow the same path may be overly simplistic.

Derivatives Market Indicates Cautious Optimism

Examining the Ether futures market reveals how professional traders are positioning themselves. Typically, ETH futures should show an annualized premium of 5% to 10%, a condition known as contango. Before May 20, major investors and market makers lacked confidence in Ether’s performance, evidenced by an annualized premium below 10% for leveraged long positions. The rise to a 15% premium indicates a moderate risk appetite among bulls, yet this is still below the 20% to 27% range seen in March.

These derivatives metrics suggest that Ether traders are not overly optimistic or fully pricing in the approval odds of the U.S. spot Ether ETF. For bearish traders, this reduces the potential negative impact of a denial, as there isn’t excessive leverage among buyers. Thus, Ether’s current price does not fully reflect the anticipation of approval, indicating room for further gains.

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