Happy ETH spot ETF approval!
BTC bottomed slightly below USD 65,900 on Sunday night after Fed Chair Powell’s speech. BTC and the overall crypto market started its rally on Monday evening after news that Bloomberg analysts had raised the estimated chance of the ETH approval by the end of May to 75%, up from 25% a week earlier. Following the news, BTC peaked at USD 72,000 on Tuesday night as traders took profits and focused on ETH and ETH-related assets. Despite positive ETF flows for the ninth consecutive day, the sell-off continued during yesterday’s session and USD-supportive macro data (PMI data and initial jobless claims higher than expected) sent risk assets lower. With no news on the ETH ETF at 10 pm yesterday, most likely the algos started selling, sending the price down to USD 66,250 before recovering to USD 68,000 (news broke at around 11 pm); it is currently trading above USD 67,000.
The fast 19b-4 approval of the ETH Spot ETF is an example of a huge political shift, as the general sentiment prior to Monday was that approval by the end of May was almost unthinkable. With the US House of Representatives approving the FIT21 crypto market structure bill, which is the first instance of comprehensive crypto legislation to pass the full House of Representatives and the White House, despite opposition saying it is “committed to working with Congress to ensure a comprehensive and balanced regulatory framework for digital assets,” this looks very promising for the crypto industry going into the election period. Furthermore, it opens the door for more spot ETFs such as SOL, as the crypto assets are no longer considered as a security, but rather a commodity.
Nevertheless, in order to start trading the ETH spot ETF, the S-1 documents will need to be approved, which Bloomberg analysts say could take a few weeks and could cause further volatility in the meantime.
While ETH traded above USD 3,000 over the weekend, the cryptocurrency increased over 28%, consolidating after its first leg above USD 3,700 and peaking at around USD 3,950 before yesterday’s US session. It then sold off and tested the USD 3,500 level after ‘no news’ at 10 pm, before recovering to USD 3,900 following positive news at 11 pm; currently, it is trading below USD 3,700. With the stock market topping (one of the only positive performers in the S&P 500 yesterday was NVIDIA after its better-than-expected earnings at Wednesday’s closing) and cryptos also closing yesterday, this could be a sign of some more choppy markets for the next few weeks.
On another note, the approval of the spot ETH ETF raises the question of whether people will start to perceive BTC differently, given that many previously viewed it as the only real cryptocurrency.
The 30-day BTC ATM implied volatility decreased from 54% to 51% (-3% WoW, yesterday morning: 54%), while the 30-day ETH ATM implied volatility jumped from 56% to 66% (+10% WoW, yesterday morning: 75%). The 25-delta skew has turned positive for both BTC and ETH on all time frames longer than 7 days, with a higher skew for ETH than BTC. The negative skew between 0-7 days for both cryptocurrencies confirms my bias for choppy conditions in the short term, but bullish in the medium to long term.
Key economic events next week will be the US CB Consumer Confidence on Tuesday, preliminary Germany CPI on Wednesday, US GDP QoQ (Q1) and China Manufacturing PMI on Thursday, and last but not least Core PCE Price Index and Chicago PMI on Friday.
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