The Launch of Spot Ethereum ETFs is Imminent, Will the Market First Fall and Then Rise?

[TL；DR]:

The news that the spot Ethereum ETF will be fully approved by the end of summer has been officially confirmed, and Ethereum’s liquidity-staking sector-related tokens such as ETHFI, LDO, and SSV have benefited significantly.

The market’s response to this news did not continue the strong momentum of pulling up as it did on May 20, but rather showed signs of weakness in the absence of other catalysts.

Recently, the market has been experiencing a general decline, and the scale of Ethereum ETFs without staking mechanisms may be limited, but there is still great growth potential in the long run.

Introduction

Gary Gensler, chairman of the US SEC, recently said that the Ethereum ETF would be fully approved at the end of the summer. However, the price of Ethereum fell due to the impact of the Federal’s policy meeting. At present, the market is still in a volatile situation.

Spot Ethereum ETF Will be Approved at the End of Summer, with Outstanding Performance in Sector Tokens

On June 13, Gary Gensler, Chairman of the U.S. Securities and Exchange Commission, testified at a Senate hearing that the spot Ethereum ETF is expected to receive full approval from the agency by the end of the summer.

Gensler further stated that after the initial approval of the first batch of ETFs, the entire process is “progressing smoothly.” Currently, the final registration documents for these funds, namely S-1 documents, are actively being processed by SEC staff.

In fact, Ethereum surged 20% earlier than May 20 and absorbed the positive news, so there was no expected surge after the news broke out.

As shown in the figure below, Ethereum prices led the way up in the early trading session at the time of the news but quickly encountered selling pressure and retreated below $3,500.

Source: Gate.io

After the Fed policy meeting announced that interest rates remained unchanged in the range of 5.25% to 5.50% and that only one 25 basis point rate cut would be made within the year, the market’s Optimism turned cold. In the afternoon of that day, the overall market showed a downward trend, indicating that market price fluctuations mainly revolved around the future results of this expected rate cut.

Although the overall crypto market has been somewhat lackluster recently, the Ethereum eco token still shows a certain degree of price elasticity and can quickly lead a rise when the market stabilizes.

Specifically for the relevant coins, the coins with the most significant increase are the re-staking projects Ether.fi (ETHFI) and Renzo (RZO). Especially for Ether.fi, as a leading re-staking project with a TVL of up to $6.1 billion, the price of Ether.fi rose by over 7% after Consensys revealed that the SEC had ended its investigation into Ethereum 2.0 without making any securities charges against it.

Another coin worth noting is Lido (LDO). As a leading LSD project in the ETH eco, its TVL (total value locked) is as high as $33 billion, but it has been undervalued for a long time. On the day of writing, LDO passively bottomed out and quickly rebounded, with relatively strong price performance.

In addition, as a leading project in Ethereum staking infrastructure, ssv.network (SSV) is decentralized, allowing anyone to easily and scalable participate in ETH staking. According to official website data, the total TVL of SSV has exceeded $2.7 billion, with over 24000 validation nodes, demonstrating its strong market influence and broad application prospects.

After the Launch of ETFs, will Ethereum Repeat the Path of Bitcoin Falling First and Then Rising?

The launch of spot Ethereum ETFs will greatly simplify the process of investors accessing Ethereum, thereby driving its market demand growth. This move is expected to attract the inflow of institutional capital, which is a long-term positive for the Ethereum eco and even the entire crypto market.

For example, analyst Eric Balchunas predicts that Ethereum spot ETFs may attract 10% to 15% of the assets acquired by Bitcoin spot ETFs, or $5 billion to $8 billion.

Asset management company VanEck is optimistic about Ethereum’s future. It predicts that its price will reach $22,000 by 2030, based on Ethereum’s projected $66 billion in “free cash Flow“ over the next decade. Meanwhile, Ethereum’s rich decentralized application (DApp) eco has added unique technological advantages, attracting the attention of technology and stock investors.

However, it is worth noting that, as we mentioned earlier, the market’s response to this news has not continued the strong momentum of the May 20 rally, but has been weak in the absence of other catalysts.

Source: Gate.io

There may be several underlying reasons behind this:

Firstly, the official debut of spot ETFs will take some time. Although the Ethereum spot ETF has been approved, its official listing still requires a series of processes and conditions to be met, including submitting S-1 documents, all of which require time to advance.
Therefore, before the actual listing of spot ETFs, people’s expectations of the market buying Ethereum, like betting on Bitcoin, are relatively conservative.

Secondly, the impact of market sentiment cannot be ignored, especially with the recent hawkish stance of the Fed’s monetary policy, which still leads to insufficient liquidity in the crypto market and a natural lack of driving force on the market.

Furthermore, investors may refer to Bitcoin’s price trend and be bearish on Ethereum in the short term. For example, we have seen that after the official approval of the spot Bitcoin ETF, the price actually fell by nearly half a month, with a drop of over 21%. The direct cause is the significant selling of Grayscale GBTC in a short period of time, and this historical memory is likely to reappear in Ethereum’s price performance.

Source: Gate.io

Can ETFs without Staking Mechanisms Really Bring a Bull Market with the Widespread Decline in Altcoins?

In fact, the launch of spot Ethereum ETFs has profound significance for Ethereum itself. On the one hand, it will bring more market demand and investor attention to Ethereum, further driving its price up. We have observed that after positive progress in ETFs, Ethereum prices have shown strong upward momentum in the short term, breaking through key resistance levels in the short term. On the other hand, the launch of ETFs will also bring more application scenarios and eco construction to Ethereum, further consolidating its leading position in the crypto field.

In the long run, with the approval of ETFs from countries such as the United States, other countries/regions may follow suit and explore similar crypto products, which will further promote the crypto market’s globalization process and capital flows and cooperation between different countries and regions.

However, investors must also be vigilant about potential risks when focusing on the opportunities brought by Ethereum ETFs. On the day of writing, the crypto market experienced severe fluctuations after a sharp drop, with many Altcoins often experiencing a 20% drop. Ethereum also fell from the ETF-hyped high of $3,980 to around $3,350, with a 24-hour drop of 3.32%.

Source: SoSo Value

From this, it can be seen that although spot ETFs have long-term benefits for Ethereum and its liquidity-staking sector, we still need to guard against leverage risks caused by short-term fluctuations.

In short, with the advancement of Ethereum ETFs, other favorable factors are also providing support for the crypto market, such as the Prague upgrade at the end of the year, the expected inflow of funds from interest rate cuts, and other policy benefits that may arise from the US election. We will also welcome the formal recognition of digital assets such as Ethereum by regulatory authorities, and the entire crypto market will also mature in a cycle of ups and downs.