Ethereum's ETF Enthusiasm Fizzles: A Closer Look at the Sub-$4K Stagnation

2024-06-05, 07:23

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## [TL; DR]
The United States Security and Exchange Commission approved Ethereum ETFs on 23 May.

It may take weeks or months for the ETF issuers to launch ETH ETFs.

ETH ETFs will increase liquidity in the Ethereum market.

## Introduction 
The United States SEC’s approval of crypto exchange traded funds (ETFs) has ushered a new era in the cryptocurrency industry as it has attracted much institutional investment. Whereas the launch of spot <a href="/uk/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin</a> ETFs signalled the start of mainstream cryptocurrency acceptance the approval of spot Ethereum ETFs has heralded the expansion of the role of digital assets in the financial world.

Today, we discuss the journey of Ethereum towards the ETF approvals in the United States. We will also evaluate the current state of affairs within the ETH ETF market.

## Ethereum ETF Approvals: A Brief Celebration
Following the United States SEC’s [approval of spot Ethereum ETFs on 23 May](https://www.gate.io/blog_detail/4168 "approval of spot Ethereum ETFs on 23 May") the cryptocurrency community responded positively resulting in a short period surge of Ether (ETH). Several asset management firms that include Fidelity, Bitwise, VanEck, Franklin, ARK Invest and Grayscale were granted the right to launch spot ETH ETFs, upon completing the required paperwork.

The <a href="/uk/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum price</a> analysis shows that after the ETF approval the ETH price spiked above $3,900 but receded to $3,720 within a short period. The following graph shows ETH’s price movement after the approval of the ETFs.
![](https://gimg2.gateimg.com/image/article/17175719741.jpg)
Ethereum Price Movement after the US SEC’s Approval of ETH ETFs - CoinGecko

As the diagram shows, the Ethereum price reached $3,946 after the approval of the ETFs. Although the price receded it has remained fairly high since that time as it is fluctuating above $3,600. What is also worthy of recognition in the diagram is the ETH price spike that occurred on 20 May, a week before the ETF approval date. The anticipation of the US approval of spot ETH ETFs was the reason behind that strong price action.

## Pizzino: Why Ethereum's Price didn’t soar Past $4,000 And the Lukewarm Rally of the ETH/BTC pair
No doubt, the crypto market was anticipating that the ETH price would overcome the $4,000 resistance level after the approval of the ETFs. But that did not happen. So, what could be the explanation for that?

Despite a promising price action on 23 May which resulted in a 0.65% rise in its market capitalization ETH failed to breach the $4,000 resistance level. Jason Pizzino, a crypto analyst, thinks that the investors’ cautious approach stalled ETH’s potential price up thrust.

As per a [BeInCrypto publication](https://beincrypto.com/ethereum-etf-approval-price-below-4000/ "BeInCrypto publication"), Pizzino said, “The Ethereum ETF has been approved. However, that wasn’t enough to pump the price past $4,000. The ETH/BTC pair also saw a weaker than expected rally.” However, some crypto analysts believe that the ETH price will likely reach $8,000 by the end of 2024 as a result of the capital inflow from the ETFs.

The market might not have responded as strongly as people expected since the ETFs are not yet launched. As such, there is still limited cryptocurrency investment inflows into the Ethereum market. The reason is that the ETF issuers will need to get a go ahead from the SEC before they launch the ETFs. Therefore, it may take weeks or months before the ETFs are traded on the exchanges. The situation was different from what happened to spot bitcoin ETFs which were launched on the exchanges within 24 hours of the SEC’s approval.

## Pepe's Brief Triumph and Decline: Detailing the meme coin's immediate reaction to the ETF news
Apart from ETH’s lukewarm response to the news of the US ETH ETF approval several <a href="/uk/price/ethereum-eth" target="_blank" class="blog_inner_link">Ethereum</a> network-based tokens reacted in a mixed manner. The Ethereum market trends show that PEPE reacted positively to the news since its price rose significantly to reach a new all-time high of $0.00001576. However, the bullish momentum did not last for a long period as it retraced by 8%, thereafter.

Although initially the Arbitrum price rose it also declined by 3% within a short period. The price of <a href="/uk/price/lido-dao-ldo" target="_blank" class="blog_inner_link">Lido DAO</a> (LDO) also soared before falling again, following PEPE, ARB and ETH’s trends. The same trend which bitcoin experienced was observed among these Ethereum blockchain based tokens. In fact, after the approval of bitcoin spot ETFs the BTC price initially dropped before gaining by a large margin. In the end, the bitcoin bullish momentum lasted for months after the launch of the ETFs.

## Differences between Ethereum and Bitcoin's ETF Approval 
As said, the approval of spot Ethereum ETFs marked the consolidation of the crypto market. Now, there is much confidence that cryptocurrencies are here to stay and will contribute meaningfully to the financial sector. What is significant is that the approval of both ETH ETFs and [Bitcoin ETFs](https://www.gate.io/blog_detail/379/what-are-bitcoin-etfs-bitcoin-etfs-explained "Bitcoin ETFs") brought much jubilation in the crypto sector. However the process of approving bitcoin ETFs was different from that of ETH ETFs.

Basically, the [approval of bitcoin ETFs was historic](https://www.gate.io/learn/articles/what-the-official-approval-of-bitcoin-spot-etfs-means-for-the-crypto-industry/2055 "approval of bitcoin ETFs was historic") since there were the first cryptocurrency ETFs in the United States. Those ETFs opened the first doors for institutional funds inflow into the cryptocurrency sector. Even the retail investors started to benefit from bitcoin as they were now able to indirectly invest in BTC without the need to manage digital wallets. Also, the crypto market viewed the approval of bitcoin ETFs as the legitimization of not only bitcoin, but of all digital currencies.

Towards the approval of bitcoin ETFs the SEC was more worried about the possibility of market manipulation after their launch. Therefore, it focused on ensuring that the ETF market had necessary measures in place to protect the consumers. Now, the situation that existed after the launch of bitcoin ETFs seems to have convinced the SEC that the ETF market has suitable measures in place to prevent and deal with market manipulation.

The path towards the approval of bitcoin ETFs had fewer hurdles than the road towards Ethereum ETFs. First, the approval of ETH ETFs came after much debate on legislation required to govern cryptocurrencies. For example, the United States and the European Union are working towards introducing crypto regulation. Much discussion has also been on whether to classify ETH as a crypto commodity or security. Thus, the approval of ETH ETFs came during a period of greater regulatory uncertainty than during the launch of BTC ETFs.

Read also: [Bitcoin ETFs Have Been Trading Around the World for Years](https://www.gate.io/learn/articles/bitcoin-efts-have-been-trading-around-the-world-for-years/2801 "Bitcoin ETFs Have Been Trading Around the World for Years")

## Parallels between Ethereum and Bitcoin's ETF Approval past Market Behavior
The crypto market reacted differently to the launch of bitcoin ETFs and Ethereum ETFs in the United States. However, there were one or two similarities.

Market Impact and Reactions: The approval of both bitcoin and ETH ETFs sparked interest in the assets. Both institutional and retail investors have shown willingness to invest in these two cryptocurrencies through the regulated financial assets (ETFs). Those who are not willing to buy ETH or bitcoin directly can now invest in their derivatives, especially the exchange traded funds.

Trading Volumes and Price Movements: After the approval of bitcoin ETFs the BTC price surged, accompanied by high trading volumes. Similarly, the SEC Ethereum approval led to a similar trend. Both the Ethereum trading volume and price surged during a 24-hour period following the approval of the ETFs.

The notable difference between the bitcoin and [ETH price movements](https://www.gate.io/price-prediction/ethereum-eth "ETH price movements") after the approval of the respective ETFs was the length of their post- ETF approval bullish outlook periods. The ETH price trended up for a short period of around 24 hours while the <a href="/uk/price/bitcoin-btc" target="_blank" class="blog_inner_link">Bitcoin price</a> rallied for over three months during the post ETF approval phase.

Bitcoin vs. Ethereum Correlation: Although bitcoin and ETH used to have a correlation, the approval of Ethereum ETFs is likely to strengthen that positive relationship. This is because the SEC’s approval [of crypto ETFs](https://www.gate.io/blog_detail/207/why-do-people-choose-crypto-etfs-what-are-the-advantages-and-disadvantages "of crypto ETFs") has acted as the United States’ recognition of the two assets as worth investment instruments. Thus, both institutional and retail investors are likely [to buy Ethereum](https://www.gate.io/how-to-buy/ethereum-eth "to buy Ethereum") and bitcoin in more proportional amounts than before. Also, the investors may pour their funds in the ETH/BTC pair.

## SEC's Changing Stance on Cryptocurrency ETFs
It’s unsurprising that the SEC has changed its stance towards crypto ETFs. First, it looked precarious for the SEC to disapprove Ethereum ETFs due to the bitcoin precedence. If the SEC had disapproved ETH ETF applications the applicants could have sued the regulatory body on the legal basis that both ETH and BTC are cryptocurrencies, leaving no room for discrimination.

Second, in the short period the spot bitcoin ETFs have been in existence there has been no market manipulation nor any other threat to crypto ETF investors. That scenario might have created confidence in the regulatory body that the same cooperative situation will continue after the approval of ETH ETFs.

Finally, there has been much political pressure for the Biden administration to adopt pro-crypto policies. For instance, during his election campaign Donald Trump has been attacking the Biden administration and the SEC chair, Gensler, for stalling progress in the cryptocurrency sector. Such political pressure might have loosened the SEC’ hard stance against crypto assets.

##  The Role of ETFs for Crypto Investments
Crypto ETFs, which are derivatives, simplify cryptocurrency investment processes. First, the investors do not need to buy and hold cryptocurrencies like bitcoin and ETH. They just benefit from their price movements through investing in ETFs. As a result, the process of investing in cryptocurrencies becomes convenient and less risky. This is because there is no chance that the investors’ crypto assets can be stolen through hacking or other means.

Since ETFs are traditional investment assets many traditional investors can also trade them. The fact that these are regulated financial instruments creates confidence among conservative investors. In all, crypto ETFs attract much investment in the sector which increases liquidity in the market and promotes digital asset trading.

## Conclusion 
After the United States SEC approved the Ethereum ETFs on 27 May the ETH price gained by 22% but later dropped again. The approval of both ETH ETFs and Bitcoin ETFs has attracted much institutional investment in the sector. One other good thing about crypto ETFs is that they simplify investment in cryptocurrencies. After the launch of bitcoin ETFs there was much capital inflow into the BTC market. The crypto market anticipates that after the launch of ETH ETFs there will be more institutional investment in the altcoin than before.

<div class="blog-details-info">
<div>Author:**Mashell C.**, Gate.io Researcher
<div class="info-tips">\*This article represents only the views of the researcher and does not constitute any investment suggestions.
<div>\*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all cases, legal action will be taken due to copyright infringement.
</div>

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