Approval relief. Ethereum spot ETF has been shockingly approved and the crypto market landscape will never be the same! What happened this week on the markets?
With the SEC's first final decision on an active ETH spot ETF application scheduled for Thursday, market participants entered the week expecting significant volatility…
Although an overwhelming consensus was that spot ETH ETFs would be disallowed by this deadline, rumors that the SEC was unexpectedly communicating with issuers began to circulate on Monday.
The prior absence of any meaningful communication had caused market participants to prepare for refusal, but the sudden turnaround led Bloomberg's ETF analysts to triple their chances of approval, to 75%!
Renewed confidence in the rollover caused traders to turn to long positions in ETH, which pushed the ETH/BTC ratio back above the key 0.05 level and led to outsized strength in the 'Ether throughout the week (or at least until ETF approval).
Many in the crypto market had long clung to the belief that BTC was a special type of digital asset and would be the only one to benefit from regulatory clarity as a non-security. However, indications that the ETH ETF could be approved have blown a hole in this narrative. and confirmed that BTC will have to compete with other digital assets for TradFi's attention.
BTC’s loss of narrative strength can be clearly seen in the charts; Bitcoin Dominance had its worst week since the arrival of spot BTC ETFs which enabled redemptions for the Grayscale Bitcoin Trust (GBTC) and led to selling pressure that sent the price of the tokens tumbling.
Unfortunately, the approval of the ETH ETF marked peak strength for alts. ETH/BTC fell 7% from its approval highs on Thursday and Bitcoin was one of the market's only gainers on Friday as traders exited assets that outperformed before the approval of the Ether ETF.
Although this week's headlines proclaim “ETH ETFs approved”, there remains a remote possibility that the SEC will reverse its green light, as the approvals were granted by “delegated authority” by SEC staff, which a commissioner can contest within 10 days. Nonetheless, Eric Balchunas, senior ETF analyst at Bloomberg, rejected these concerns purely and simply.
Alternatively, traders may be wary of the potential selling pressure that can be expected from the $10 billion AUM Grayscale Ethereum Trust (ETHE); its conversion into a spot ETF allows redemptions and allows the instrument to trade at par for the first time in three years.
The core doctrine of the laser-eyed BTC maximalists may have suffered a crushing fundamental defeat now that it appears any digital asset – regardless of its origin – can become a non-security, but the leaders of this sect remain steadfast in their beliefs that there is always no second choice.