The Impact of Spot Ethereum ETF Approvals on Ether’s Price

After weeks of adjustments to registration statements, several spot Ethereum ETFs have been approved for trading, with the launch scheduled for Tuesday. Despite this development, Ether’s price has remained relatively stable. Analysts at Kaiko suggest that the crypto asset could be “sensitive” to inflows from spot ETFs in the coming days, given the lukewarm demand for futures products in late 2023.

Traders are bracing themselves for diverse outcomes following the launch of spot Ethereum ETFs. Kaiko’s head of indexes, Will Cai, pointed out that the futures-based Ethereum ETFs launched in the US last year had faced underwhelming demand. Now, all eyes are on the spot ETFs, with expectations of rapid asset accumulation. Cai emphasized that Ether’s price could be particularly affected by the inflow numbers in the initial days.

Ether experienced a brief spike in May after the approval of the 19b-4 rule but has since trended lower. The cryptocurrency had previously reached levels around $4,000 in March, coinciding with Bitcoin’s record highs. Over the weekend, Kaiko observed a surge in Ether’s implied volatility, signaling increased uncertainty in the market. Traders are paying higher premiums to hedge their bets, indicating a lack of confidence in the ETF launch.

Implied volatility on contracts expiring in August and September remains high, reflecting heightened expectations and uncertainty among traders. Some analysts have suggested the possibility of a “sell the news” event, where investors might sell off their positions following the ETF launch. Pseudonymous analyst ‘Kaleo’ even predicted a “high likelihood” of a pullback in Ether’s price, with a potential plunge below $2,800 before a price discovery.

The approval and impending launch of spot Ethereum ETFs have created a sense of anticipation and uncertainty in the market. Traders are preparing for diverse outcomes, with some fearing a potential sell-off event. The heightened volatility and lack of positive reaction in the market suggest a cautious stance among investors. As Ether’s price remains sensitive to inflows from spot ETFs, the coming days will be crucial in determining the cryptocurrency’s trajectory.