Following the approval of spot Ethereum ETFs, there has been a notable shift in sentiment around the leading altcoin. The greenlighting by the SEC after a period of stalling caused a huge frenzy in the market driving the price of ETH up by over 25%. Also, the positive regulatory news came amidst two crucial regulatory events. One, the US House passed its first comprehensive crypto bill, and the UK approved crypto exchange-traded products.
It needs to be noted that the SEC has just approved 19b-4 filings from NYSE, Cboe, and Nasdaq, and needs to review S-1 forms from issuers like BlackRock, Fidelity, and VanEck, delaying the start of trading. However, the approval indicates the regulator views Ethereum [without staking] as a commodity, which could positively influence the regulation of similar tokens in the US.
Commenting on the massive shift, Will Cai of Kaiko, a leading data provider, stated, “With these approvals, the SEC implicitly stated that ETH (without staking) is a commodity rather than a security. This isn’t just about access to ETH, but has significant and likely positive ramifications on how all similar tokens will be regulated in the U.S. with respect to trading, custody, transfer, etc.”
Ethereum Volatility Surges
Digging deeper, Kaiko noted some key trends in the market post-ETF approval. First is the surge in ETH’s implied volatility and derivatives markets, with perpetual futures funding rates and open interest hitting highs. Additionally, with the impending selling pressure from Grayscale’s ETH redemptions, the overall market impact remains uncertain. However, the ETF approval is seen as a positive step in reducing regulatory uncertainty for Ethereum.
“Open interest [blue] hit an all-time high of $11 billion, suggesting strong capital inflows into the space. The ETH to BTC ratio, which measures the two assets’ relative performance, also surged from 0.044 to 0.055 despite remaining below February highs. Looking at Ethereum Cumulative Volume Delta [CVD], the rally was broad-based, with both US and offshore spot markets seeing strong net buying since May 21. Notably, until then, offshore exchanges were registering net selling.“