Bets on Ether’s continued gains are rising following a surprising shift by US regulators to allow exchange-traded funds (ETFs) for the digital asset.
Despite questions about the demand for these products, the move by the US Securities & Exchange Commission (SEC) triggered a 26% increase in Ether’s value over the past week, marking its largest weekly jump since the 2021 crypto bull market, according to Bloomberg data.
Speculation Driven by ETF Launches
Investors are drawing parallels with the record-breaking launch of US spot-Bitcoin ETFs in January, which have already amassed $59 billion in assets. However, Ether, being less well-known than Bitcoin, presents a more uncertain landscape in terms of investor interest.
Staking Exclusion Could Impact Interest
Unlike holding Ether directly, spot-Ether ETFs will not engage in staking, the process of earning rewards by pledging tokens to support the Ethereum blockchain. This exclusion could reduce the attractiveness of these funds compared to directly holding the tokens.
Awaiting Further Approvals
Further approvals from the SEC are needed before firms like BlackRock Inc. and Fidelity Investments can launch their Ether ETF products, with the timeline for these approvals still unclear. As of 8:38 a.m. Monday in London, Ether was trading around $3,900, while Bitcoin remained steady at $68,500.
Market Outlook
Chris Weston, Head of Research at Pepperstone Group, noted in a report, “The risk in Ether remains to the upside and pullbacks are a buying opportunity.”
Future Scenarios for Ether
Bets on $5,000
Data from the Deribit trading platform indicates that many traders are betting on Ether reaching $5,000 or higher, with the current record being $4,866 set in November 2021.
Volatility Expectations
The gap between the T3 Ether Volatility Index, which reflects expected 30-day price swings, and a similar index for Bitcoin is the widest it’s been since early 2023. This suggests that speculators anticipate more significant price fluctuations for Ether compared to Bitcoin.
Institutional Demand Insights
Analysts are watching the demand for Ether futures on the Chicago-based CME Group Inc. as an indicator of US institutional interest in regulated crypto exposure. While open interest in CME Ether futures is rising, it remains significantly lower than for CME Bitcoin futures, indicating less institutional engagement with Ether. This trend might also imply a tepid initial reception for prospective Ether ETFs.
Noelle Acheson, author of the Crypto Is Macro Now newsletter, wrote, “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.”
Conclusion
As the SEC’s decisions unfold and market dynamics evolve, the future of Ether and its associated ETFs remains a space to watch closely. Investors and speculators alike are poised for potential gains and navigating the volatility expected in the coming months.
