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The approval of spot Ethereum (ETH) exchange-traded funds (ETFs) in the US could lead to a significant increase in the value of the token, mirroring the market reaction seen after the approval of bitcoin ETFs.
Approval of spot Ethereum ETFs in the US could lead to a rally of up to 60% in the second-largest cryptocurrency in the coming months, Singapore-based QCP Capital said in a post on Telegram on Thursday. This prediction mirrors the market reaction seen following the approval of spot bitcoin ETFs in January. Bitcoin rose from $42,000 to over $73,000 in the two weeks after the ETFs began trading on Jan. 11, according to CoinGecko data.
“Implied volatility on Friday is over 100%, the market is expecting a big move,” QCP said. “VanEck’s ETF has been listed by DTCC. We think approval is now highly likely and trading is expected to begin early next week.”
Increased Buying Activities and Volatility Expectations
Implied volatility measures market expectations of future price fluctuations of a financial instrument. Stating that purchasing activities have increased on centralized and blockchain-based crypto exchanges, on-chain analysis firm CryptoQuant said in a report published on Wednesday that users purchased more than 100,000 ETH in the spot market on Tuesday, which was the highest daily level since September 2023. . Reports increased the odds of a positive decision from 25% to 75%.
The amount of open positions in futures contracts related to ETH also reached a record level, reaching 14 billion dollars. That’s 67% of bitcoin open interest as of Wednesday, an unusually high level.
“Investors appear to have more exposure to ETH than to Bitcoin,” CryptoQuant said. “Largest daily spot purchase from ETH permanent holders so far in 2024.”
ETH prices may be volatile in the coming days as investors sent 62,000 ETH to exchanges, the highest level since early March. “High stock market flows are typically associated with price volatility.”
On the other hand, firm analysts warned that there could be a “significant price correction” if the ETF application is rejected.
Six issuers filed updated copies of their ether ETF proposals this week. All applications removed plans to stake the token, indicating that this activity could be a regulatory hurdle. Staking is the process of locking a cryptocurrency for a certain period of time and is done to earn a reward to support the operation of the blockchain. These rewards are largely considered passive income among crypto traders.
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