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Ether Surges on US Regulatory Shift Toward ETFs: What’s Next?

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.

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Disclaimer: Not Investment Advice

it’s crucial to understand that the information provided here is not to be construed as investment advice. The crypto market is dynamic and highly speculative, and decisions should be made based on thorough personal research and consideration of individual risk tolerance. Always consult with financial professionals and conduct your own due diligence before making any investment decisions. The intention of this exploration is to present insights and trends, not to provide specific investment recommendations.

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