- Ethereum’s recent recovery follows a significant price rally, with ETF endorsements seen as bullish.
- Market volatility and trading activity suggest a complicated, potentially bullish future for Ethereum.
Ethereum [ETH]a leading cryptocurrency and blockchain platform, has seen significant market activity in recent weeks.
After a significant rise of approximately 31.5% in two weeks, pushing its value above $3,900, Ethereum underwent a slight correction, settling around $3,845.
This volatility comes amid broader market movements and regulatory developments that could affect the asset’s future trajectory.
Crypto research firm Kaiko has shed light on these developments, focusing in particular on the potential impact of US Securities and Exchange Commission (SEC) approval. spot Ethereum ETF.
This approval is seen as a positive step for Ethereum, despite potential short-term market corrections.
The implications of such regulatory progress extend beyond immediate price effects, potentially shaping Ethereum’s position in financial markets and significantly influencing investor sentiment.
Ethereum: Market Reactions
Kaiko’s analysis reveals that the introduction of an Ethereum ETF may initially trigger selling pressure due to potential outflows from existing investment vehicles such as Grayscale’s Ethereum Trust (ETHE).
The firm currently manages over $11 billion in assets.
Historical data from similar scenarios suggests that such outflows can significantly impact daily trading volumes.
However, as seen with the Bitcoin ETF, the initial outflows were eventually offset by subsequent inflows, indicating a possible stabilization after the ETF’s launch.
Will Kai, Head of Indices at Kaiko, highlighted the broader implications of the SEC decision, noting it as a declaration of Ethereum’s status as a commodity rather than a security.
This classification not only affects the trading and custody of Ethereum, but also sets a precedent for the regulation of similar tokens in the US, possibly fostering a more stable regulatory environment.
Meanwhile, according to Kaiko, Ethereum’s market depth on centralized exchanges stood at approximately $226 million at the time of the report – 42% below pre-FTX collapse levels.
Only 40% of this is focused on US exchanges, down from around 50% seen in early 2023.
Source: Kaiko
The research firm noted:
“Overall, even if inflows are disappointing in the short term, the approval has important implications for ETH as an asset, removing some of the regulatory uncertainty that weighed on ETH’s performance over the past year.”
Insights into variability
Additional insights from Kaiko highlighted Ethereum’s volatility trends. Notably, Ethereum’s implied volatility jumped dramatically in late May, indicating increased market activity and investor interest.
This was accompanied by an inversion in the volatility pattern, where near-term volatility exceeded longer-term expectations — a common indicator of market stress or significant trading activity.
Source: Kaiko
In the derivatives markets, Ethereum showed remarkable dynamics.
Interest rates on Ethereum perpetual futures have seen a sharp increase from their lowest level in more than a year to a multi-month high in just a few days.
At the same time, Open Interest in these futures reached a record $11 billion, suggesting steady capital inflows and increased trading activity.
Source: Kaiko
Despite these promising signs, some indicators suggest caution.
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AMBCrypto’s look at Glassnode data shows a recent drop in the number of new Ethereum addresses, which could mean a slowdown in the influx of new entrants to the network.
Source: Glassnode
However, our look at Ethereum’s daily chart revealed that the asset has recently converted a major resistance level into support, potentially setting the stage for further gains and possibly breaching the $4,000 mark.
Source: TradingView