Is 2024 the year for cryptocurrency ETFs? As the SEC, once seen as the enemy of crypto, is on track to approve an Ethereum spot ETF.
Bloomberg ETF analysts have increased their odds of the spot Ethereum ETF to an approval chance of 75%. Prior to this news, the likelihood of approval was sitting at a measly 25%.
ETH rallied to $3700, nearly 20% rise in one day on the back of this announcement. Whales purchased over 110,000 ETH worth $341 million (USD) in 24 hours. Ethereum experienced its largest amount of trading volume of any 12 hour period since March 14 2023.
May 23rd can’t come around any sooner for those invested into Ethereum and the crypto space. Whilst not guaranteed to be successful, the chance of the ETF approval is extremely bullish for all things crypto as it will result in more money entering the space. The drastic change in the likelihood of success stems from the SEC asking crypto exchanges to update their 19b-4 filings, these rule changes suggest that the SEC is making progress towards approving the spot Ethereum ETFs.
Potential Outcomes of the ETF Decision:
If the Spot Ethereum ETF is approved:
Long term bullish on ETH; this approval can only result in good things for ETH as it will result in more inflows into the coin. Ethereum is currently 33% away from it's all time high (at the time of writing). The long term effect of the ETF approval should see it blow past its high of $4,900 (USD). This is similar to what we saw happen with BTC, the spot ETF approval was the catalyst for Bitcoin hitting its ATH prior to the halving.
Short term; we may see a pullback in ETH. When the spot Bitcoin ETF was approved, we saw BTC pullback 17% over the next two weeks before continuing to rally and break all time highs. Bitcoin saw its major move prior to the approval of the ETF. Driven by the pure hype and speculation of a potential ETF, BTC rallied almost 90% since October 2023 before its approval in January of this year. Could we see similar price action occur with Ethereum? ETH rallied 20% yesterday due to the speculation of the ETF approval. Unlike Bitcoin, Ethereum has the added benefit of not having an existing ETF vehicle in Grayscale BTC. Bitcoin had the sell pressure of GBTC holders who were not able to sell their BTC for years and were finally able to sell once the other ETFs were approved. Thus, meaning Ethereum should experience much less selling pressure for Ethereum after the approval of the ETF.
Altcoins should follow Ethereum's price action, and continue their rallies and success.
If the Spot Ethereum ETF is rejected:
In the unlikely event that the ETF is declined, we can expect a major crash in the crypto space, with Ethereum likely to lead the charge. Those who purchased Ethereum in anticipation of the approval will likely sell, causing the price to slump. Whilst Bitcoin will fall, we should expect money to flow back into BTC and stablecoins. Altcoins will suffer the most.
All hope will not be lost if the SEC rejects the ETF, we can expect the applicants to make adjustments to their filings and then reapply for the ETF. The eventual approval of an Ethereum ETF is almost inevitable.
How the Spot Ethereum ETF may shape the course of American Politics:
With the upcoming US election, the upcoming spot Ethereum ETF will play a vital role in determining who becomes president. With crypto-backed candidates winning five out of six primary races, with more races to come, showing growing political power.
The SEC will soon reveal their stance on cryptocurrency on Friday. Speculation is rising that the Democrats are pushing the SEC behind the scenes to approve the Ethereum ETF in an attempt to increase their election bid. It may seem that they are becoming more crypto ‘tolerant’, with approving a Bitcoin ETF and now potentially an Ethereum ETF. Meanwhile, Donald Trump has claimed to be the ‘Crypto-President’ and has promised to support cryptocurrency if he is elected.
Regardless of Friday's outcome, we remain bullish on Bitcoin and the rest of the crypto space. If the ETF is to be rejected, it will be another set back, but the crypto space has had its fair share of setbacks and has always continued to push on and grow.
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