Ether (ETH) has been struggling to break the $3,600 level for the past three days, but many traders seem to have overlooked the fact that the price of ETH has actually surged by 58.8% since February. While some market participants believe that the limited upside is due to uncertainty surrounding the approval of a spot Ether exchange-traded fund (ETF) in the U.S., others argue that the increase in Ether futures open interest suggests strong demand from institutional investors.
The decision on whether to approve a spot Ether ETF in May is seen as crucial for Ether’s price. The recent indictment of the cryptocurrency exchange KuCoin by the United States Justice Department has sparked a debate among industry experts. Some view the indictment as a negative development, as it could lead to stricter regulations. However, others believe that it could actually improve the chances of a spot Ether ETF being approved by the U.S. Securities and Exchange Commission (SEC) by May 25.
A complaint filed by the U.S. Commodity Futures Trading Commission (CFTC) against KuCoin on March 26 identified Bitcoin (BTC), Ether, and Litecoin (LTC) as commodities falling under the CFTC’s jurisdiction. This directly challenges the SEC’s classification of Ether as a security.
BlackRock CEO Larry Fink has stated that listing an Ether ETF could still be possible even if regulators classify Ether as a security. Bloomberg senior ETF analyst James Seyffart, on the other hand, predicts that the ETF will be denied in May. He points out that the CFTC has recognized Ether as a commodity since February 2021 when they allowed CME Ethereum futures to begin trading.
The growth of the Ether futures market is seen as a positive development, as it increases liquidity and attracts hedge funds and large asset managers. However, the recent surge in Ether futures open interest should not be seen as a bullish indicator on its own. It is important to note that Binance has the largest share of the ETH futures market, followed by Bybit and CME.
In addition, the volume of long positions in derivatives markets is typically equal to the volume of short positions. However, the demand for leverage can indicate market sentiment. Currently, there is a moderate optimism in the market, with a positive funding rate indicating increased demand for bullish leverage positions.
To get a more accurate understanding of professional traders’ sentiment, the Ether options market should be examined. The 25% delta skew, which measures the difference in pricing between upward and downward protection, suggests a neutral market stance. However, compared to data from March 21, traders are now less optimistic about Ether’s potential to surpass the $3,800 mark.
Disclaimer: This article does not provide investment advice. Readers should conduct their own research before making any investment decisions.