Ether price rallies on spot-ETF launch speculation as solana surges

Ether has rallied in the past fortnight, outperforming bitcoin.
Ether has rallied in the past fortnight, outperforming bitcoin. (ozgurdonmaz via Getty Images)

Ether (ETH-USD), the native cryptocurrency of the Ethereum blockchain, rallied in the past fortnight, outperforming bitcoin. This comes as the US Securities and Exchange Commission (SEC) approves eight spot ether exchange-traded funds (ETFs).

On 23 May, the SEC approved spot ether ETF applications from fund managers including BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy and Franklin Templeton.

In the two weeks leading up to the approval and afterwards, the value of ether rose by over 28%, reaching $3,748 (£2,948) as of the time of writing. In the same period, other major crypto tokens, bitcoin (BTC-USD) and solana (SOL-USD) increased by 4.2% and 6.25% respectively, according to Coingecko data.

The anticipation surrounding the impact of these ETFs led to a surge in investor interest. Derivatives market indicators show that many traders expect ether to increase in value once these ETFs begin trading on major exchanges, such as the Chicago Board Options Exchange (CBOE), Nasdaq (^IXIC) and the New York Stock Exchange (^NYA) in the coming weeks or months.

Trading of ether ETFs on exchanges depends on the completion of specific filing documents, called S-1 registration statements, even though their 19b-4 filings have already been approved by the SEC. This process could take anywhere from a few days to several months.

Read more: Solana: Why Ethereum's lesser known rival is steadily rising

Like the spot bitcoin ETFs approved in January, traders anticipate that these financial products will open the gateway for mainstream capital to flood the crypto market. The indications for spot bitcoin ETFs have been favourable so far, with fund managers, such as BlackRock (BLK), allocating inflows of almost $20bn since their launch in January. If this pattern is mirrored with spot ether ETFs and the supply dynamics for the token remain largely unchanged, it could lead to a price appreciation for the digital asset.

The SEC's approval of spot ether ETFs also generated more trading volume across the cryptocurrency market. Unlike the rapid launch of bitcoin ETFs, however, which began trading shortly after approval, the ether ETFs might take weeks or months to go live, but this delay seems to have fuelled speculation and trading activity.

According to data from K33 Research, the ether-to-bitcoin ratio is rising. It has been climbing steadily since hitting a multi-month low of 0.045 in mid-May, before the SEC surprised the market on 20 May by requesting sudden amendments to spot ether ETF filings. Investors interpreted this as a precursor to the eventual approvals.

Read more: What is a spot bitcoin ETF and why has it sparked a crypto rally?

A rising ether-to-bitcoin ratio means that the price of ether is increasing relative to the price of bitcoin. K33 Research suggests that market conditions favour increased exposure to ether, drawing parallels with bitcoin's price action prior to the launch of its ETFs and anticipating similar market behaviour for ether.

"The next weeks will see filers pursuing investors to secure a solid seed and traction for the eventual ETF launch. This favours continued relative strength in ether until the ETF launch," K33 Research analysts noted.

The approval and anticipated launch of spot ether ETFs could bolster confidence and trading volumes for the digital asset. This regulatory oversight has the potential to lend credibility to ether as an investment, now that it is assured that the financial product meets the rigorous SEC standards.

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Additionally, these ETFs will increase retail accessibility, allowing the general public to invest in ether more easily. The SEC's involvement also enhances investor protection, making the asset more appealing.

Furthermore, the potential for significant investments from institutional entities, such as pension and mutual funds, could funnel billions into the crypto market, boosting ether's trading volumes and overall market confidence.

Derivatives market indicators show that ether is undergoing a significant re-evaluation period, with price adjustments reflecting this new interest. This renewed interest is not limited to ether; other high market-cap assets have also seen increased attention as the market prices in the potential for ETFs across a broader range of crypto assets.

Read more: Crypto live prices

For instance, while ether has been the focal point of recent market activity, Solana, a competing 'smart contract' layer one blockchain, has also seen a notable price increase. Solana's blockchain offers market participants high-speed transactions and lower settlement fees than the Ethereum network, making it a formidable competitor. Solana is looking to post 35-40% returns by the end of the month, its best monthly gain since December 2023.

Another sign of a notable increase in institutional crypto market participation is that trading volumes on the Chicago Mercantile Exchange (CME) for options on ether futures have reached record highs, with May's volume hitting over $1.26bn. This surge in trading activity signifies growing institutional interest, as evidenced by the increasing open interest in ether futures contracts on the CME.

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