Ethereum (ETH) has been experiencing volatility recently, largely due to its correlation with broader market trends. Despite the approval of spot ETH ETFs, the impact on the price has not been significant. However, there is optimism that Ethereum ETFs have a bright future, with expectations of substantial price impact in the near future. The US SEC approved spot ETFs for Ethereum, leading to increased investor expectations.
The Galaxy Research Team anticipates net inflows into ETH ETFs to be between 20-50% of BTC ETF inflows over the first five months, with a target of 30%. However, the success of spot Ethereum ETFs remains uncertain, as spot Bitcoin ETFs have only seen $857 million in inflows as of June 21, despite holding 84% of the entire market share. There are doubts about whether spot Ethereum ETFs will achieve $1 billion in monthly inflows.
The uncertainty surrounding the success of ETH ETFs in a bearish market could lead to market makers raising premiums to cover potential extreme price swings. Market makers are adjusting their strategies due to gamma distribution risk, which involves options’ sensitivity to price changes. This added uncertainty may result in higher pricing for tail risk related to Ethereum, discouraging excessive speculation and reducing volatility.
Despite the potential for active risk management to stabilize Ethereum’s price by providing support and mitigating significant price drops, the launch of spot ETFs may not immediately benefit the price. Ethereum’s current price of $3,395 is still below its all-time high. While the approval of spot ETH ETFs led to a 30% rally in Ethereum’s price, a subsequent 13% drop occurred due to bearish market cues and uncertainty surrounding the launch.
As the market approaches the launch of ETFs, there is anticipation for Ethereum’s price to trend upward, similar to Bitcoin’s price increase following the introduction of spot ETFs. Should Ethereum’s price rise to flip $3,829 into support, it could lead to further gains as the bull market support floor is established. A new all-time high is still a distance away, but breaching $4,000 could push Ethereum further upwards.
If Ethereum fails to breach $4,000, its price may remain consolidated below that level, with potential support between $3,700 and $3,800. Losing this support could invalidate the bullish thesis. Overall, the success of Ethereum ETFs and their impact on the price remains to be seen, with the market continuing to monitor developments closely.
