The approval of spot Ether (ETH) exchange-traded funds (ETFs) in the U.S. could potentially drive a rally of as much as 60% in Ethereum, the second-largest cryptocurrency, according to QCP Capital. This forecast mirrors the market reaction seen after spot Bitcoin ETFs were approved earlier this year.

Historical Market Reaction to Bitcoin ETFs

Bitcoin ETF Approval

When spot Bitcoin ETFs were approved in January, Bitcoin’s price surged from $42,000 to over $73,000 within two weeks, according to CoinGecko data. This remarkable increase set a precedent that many expect Ethereum to follow.

Market Anticipation

With implied volatility above 100%, the market is bracing for significant price movements. QCP Capital suggests that VanEck’s ETF listing by the DTCC increases the likelihood of approval, with trading expected to commence soon.

Read more: SEC Chair Gensler Silent on Ether ETF Decision, Urges Observers to “Stay Tuned”

Increased Buying Activity on Exchanges

Centralized and Blockchain-Based Exchanges

CryptoQuant, an on-chain analytics firm, reported a significant uptick in ETH buying activity on both centralized and blockchain-based exchanges. Over 100,000 ETH were bought on spot markets, marking the highest daily level since September 2023.

Open Interest in Ether Futures

Open interest in Ether-tracked futures spiked to a record $14 billion, representing 67% of Bitcoin’s open interest. This unusual level of interest signifies a growing focus on Ethereum among traders.

Read more: ‘Winter is Over’ — Bullishness Returns in Wake of Ether ETF Anticipation

Institutional Trading at Chicago Mercantile Exchange

Record Trading Volumes

The Chicago Mercantile Exchange (CME), favored by institutional investors, reported record notional trading volumes in Ether futures, reaching $2.85 billion. Additionally, Ether options trading hit a record with 1,135 contracts worth $216 million.

Shift in Trader Preferences

Traders are increasingly favoring ETH over Bitcoin, as evidenced by the largest daily spot buying from ETH holders in 2024. This shift indicates growing confidence in Ethereum’s potential.

Potential Volatility in Ether Prices

Exchange Flows and Price Movements

The influx of 62,000 ETH to exchanges could lead to price volatility. High exchange flows are typically associated with significant price movements, suggesting dynamic market conditions ahead.

Risks of Price Correction

Despite the optimism, analysts warn of a potential price correction if the ETF application is rejected. This caution highlights the inherent risks in the volatile crypto market.

Updated Ether ETF Proposals by Major Issuers

Regulatory Adjustments

Six issuers, including BlackRock, filed updated Ether ETF proposals, removing plans to stake the token. This change suggests that staking activities may have posed regulatory hurdles.

Staking in the Ethereum Ecosystem

Staking involves locking cryptocurrency to support blockchain operations, earning rewards in return. Ether staking currently offers annualized yields of nearly 3%, making it an attractive option for passive income.

Conclusion

The anticipated approval of Ether ETFs could trigger a substantial rally in Ethereum prices, similar to the reaction seen with Bitcoin. However, investors should remain cautious due to potential volatility and regulatory uncertainties.

FAQs

1. What is the potential impact of Ether ETF approval?

Approval could lead to a 60% rally in Ethereum prices, similar to Bitcoin’s reaction to ETF approval.

2. Why is the market anticipating significant price movements?

Implied volatility is above 100%, indicating the market expects major fluctuations.

3. What are the risks if the ETF application is rejected?

A rejection could result in a significant price correction for Ethereum.

4. How has trader interest shifted recently?

Traders are increasing their exposure to ETH relative to Bitcoin, indicating growing confidence in Ethereum.

5. What changes were made in the updated Ether ETF proposals?

Issuers removed plans to stake the token, addressing potential regulatory concerns.

6. What is staking in the context of Ethereum?

Staking involves locking ETH to support blockchain operations, earning rewards in return, with current annualized yields around 3%.

7. How did the market react to Bitcoin ETF approvals?

Bitcoin’s price surged from $42,000 to over $73,000 within two weeks of ETF approval.

8. What is implied volatility?

Implied volatility measures the market’s expectation of future price fluctuations.

9. How significant is the recent ETH buying activity?

Over 100,000 ETH were purchased on spot markets, the highest daily level since September 2023.

10. What is the role of the Chicago Mercantile Exchange in ETH trading?

The exchange is favored by institutions, with record trading volumes in Ether futures and options.