The approval of spot Ethereum exchange-traded funds (ETFs) in the United States could potentially trigger a substantial rally of up to 60% in the price of ETH.
In a recent note, Singapore-based QCP Capital, said it has achieved this forecast by drawing parallels to the market reaction following the approval of spot Bitcoin ETFs earlier this year.
QCP Capital pointed out that when spot bitcoin ETFs were approved in January, Bitcoin experienced a significant surge from $42,000 to over $73,000 within a two-week period after the ETFs began trading.
“With Friday implied volatility above 100%, the market is expecting fireworks,” QCP Capital stated.
Ether ETF Approval Might Be Around the Corner
The firm also mentioned that VanEck’s ETF had been listed by the Depository Trust & Clearing Corporation (DTCC), further indicating that approval for spot ether ETFs was highly likely, with trading expected to commence as early as next week.
The measure of implied volatility reflects the market’s anticipation of future price fluctuations for a financial instrument.
QCP Capital’s statement suggests that the current level of implied volatility in the market indicates strong expectations for significant price movement in response to the potential approval of spot ether ETFs.
CryptoQuant, an on-chain analytics firm, reported increased buying activity on both centralized and blockchain-based crypto exchanges in a Wednesday report.
On Tuesday, holders purchased over 100,000 ETH in spot markets, marking the highest daily level since September 2023.
The surge in buying coincided with reports of a favorable decision regarding spot Ether ETFs, leading some analysts to increase the odds of approval to over 75%, up from the earlier estimate of 25%.
Furthermore, open interest in ether-tracked futures reached a record high of $14 billion, accounting for 67% of bitcoin open interest as of Wednesday.
CryptoQuant noted that traders appeared to be increasing their exposure to ETH relative to Bitcoin, and the buying activity from ETH permanent holders on that day was the largest seen in 2024 so far.
#Ethereum Futures Market Sentiment
“This upward trend in the Taker Buy Sell Ratio indicates a potential shift in market dynamics. If the ratio continues to rise, it may signal a reduction in aggressive selling pressure.” – By @Greatest_Trader
— CryptoQuant.com (@cryptoquant_com) May 23, 2024
ETH Price Might See Major Correction if ETFs Denied
However, QCP Capital’s analysts cautioned that a “significant price correction” could occur if the ETF application were to be dismissed.
The reminder highlights the potential market volatility and uncertainty surrounding the outcome of the approval decision.
Six issuers, including BlackRock, recently filed updated copies of their ether ETF proposals prior to the decision, removing plans to stake the token.
The change suggests that staking activities may have posed regulatory obstacles.
As of Thursday, data from popular staking service Lido indicated that annualized yields on ether staking were nearly 3%, further highlighting the potential value and income-generating opportunities associated with participating in staking activities.
As reported, Fidelity made an amended S-1 application to SEC for its spot Ether ETF yesterday.
The updated application specifies that the underlying Ether tokens of the ETF will not be staked.
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