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Ether ETFs made a U-turn. What could be next?


Cryptocoins Exchanges / CEX.IO 89 Views

In this week’s crypto highlights, we explore market price movements and other notable industry news items that occurred over the last seven days. Without further ado, let’s dive into the latest market developments.

Market spotlight: Ether gained Solana’s market cap in a day

On May 21, Ether’s price enjoyed an almost 20% single-day price increase, boosting the asset’s market cap by $80 billion, which is roughly equivalent to Solana’s total market value. This marked the largest one-day market cap increase in Ethereum’s history, and likely happened because of exchange-traded funds (ETFs).

Source: BoldLeonidas

Not so long ago, there was consensus across the crypto community that U.S. spot Ether ETFs were unlikely to be approved in May 2024, a decision deadline for certain applications. Some prediction markets displayed as little as a 6% chance of a potential approval this month.

However, on May 20, a few days before the said deadline, market anticipations made a 180. Bloomberg analysts Eric Balchunas and James Seyffart reported “chatter” that the U.S. Securities and Exchange Commission (SEC) was asking applicants to accelerate their 19b-4 filings, which are required for ETF listings.&

As a result, analysts increased their odds of a potential spot Ether ETF approval to 75% (from the previous 25%). Shortly afterward, the Wall Street Journal and CoinDesk confirmed this statement, citing their own sources.&

In fact, a lot of new details emerged in a day:

  • CBOE published amended 19b-4 filings in response to feedback from regulators. The applicants include Fidelity, VanEck, Invesco/Galaxy, Ark/21Shares, and Franklin Templeton.&
  • Fidelity and Grayscale removed staking rewards from their filings, suggesting that spot Ether ETF investors might not be eligible for them. Staking removal was considered one of the key elements to achieve a potential approval.
  • Some spot Ether ETFs were listed on the Depository Trust and Clearing Corporation (DTCC) website. For instance, this move was one of the final steps before the spot Bitcoin ETF approval in January 2024.

And then, on May 23, the SEC officially approved eight spot Ether ETFs to be listed on their respective exchanges. However, there is some bureaucratic nuance.

The regulator only greenlighted 19b-4 filings, while applicants also need approved S-1 registration statements to begin ETF trading. So Ether ETFs turned into Schrödinger’s cat, where ETFs are approved (19b-4) and delayed (S-1) at the same time. Furthermore, some crypto enthusiasts point out that there are still chances for ETFs to be potentially denied. As a result, Ether and Bitcoin prices showed some turbulence in a narrow range following this news.

According to James Seyffart, a potential S-1 approval could take weeks, or even months, but the analyst remains optimistic about a positive outcome. If the S-1 filings are approved, Seyffart anticipates that spot Ether ETFs could attract 20% of the flows seen by spot Bitcoin ETFs. In contrast, Balchunas projects a more modest range of 10-15%.

However, from a historical standpoint, such estimates could be viewed as too optimistic. In Hong Kong, where both spot Bitcoin and Ether ETFs recently began trading, Ether products rapidly moved from 23% to only 7% of the combined volume. In addition, CoinShares regularly reports how Bitcoin accounts for over 90% of all weekly flows in digital asset funds (even before the launch of U.S. spot Bitcoin ETFs).

So even if the Ether ETF drama concludes with a positive outcome, there is still a chance that the initial demand could disappoint some crypto enthusiasts. Moreover, Grayscale has almost $11 billion in its ETH trust, which could mirror the story of GBTC outflows within the first months of ETF trading.

Although Ether ETF approval could pave the way for other digital assets to obtain similar products (there have been claims about Solana already), it might have a smaller impact on crypto markets than the decision to list BTC ETFs in January 2024.

Other noteworthy market events

CME may introduce Bitcoin spot trading

According to the Financial Times, the Chicago Mercantile Exchange (CME) Group is planning to launch Bitcoin spot trading alongside its current futures offerings. The Chicago-based exchange, which is leading in open interest for BTC futures, has reportedly been in talks with traders interested in a regulated marketplace for Bitcoin transactions.

If the CME adds this service, it would provide another avenue for Wall Street players to gain greater access to digital assets, complementing spot Bitcoin ETFs. Notably, Coinbase shares fell nearly 8% in a single day following this announcement.

MakerDAO plans to launch a “fully decentralized” stablecoin

MakerDAO founder Rune Christensen announced plans to introduce a new stablecoin called PureDai, aimed at providing a fully decentralized alternative to Dai. The launch is anticipated to take place in a few years.&

Key features of PureDai include:

  • Deployment on the Ethereum network, with layer 2 (L2) protocols and cross-chain bridges enabling its transport to other blockchains.
  • The exclusive use of decentralized assets, such as Ethereum (ETH) and Lido-staked Ether (stETH), as collateral.
  • Decentralized oracles for price feeds to prevent manipulation.
  • A free-floating peg, meaning it may not be directly tied to the U.S. dollar.
  • It will be released alongside another stablecoin, NewStable, which MakerDAO plans to introduce soon.
  • PureDai will be launched in its final, immutable form, functioning independently from MakerDAO without the need for future upgrades or changes.
  • Dai holders will be able to upgrade to PureDai.

Notcoin lost 60% of its value after its debut

On May 16, TON-based Notcoin (NOT) was initially listed on multiple crypto exchanges, achieving over $1 billion in trading volume within a single day. The asset briefly entered the top 100 digital assets by market cap, marking it as the biggest gaming token release of 2024 so far.

Notcoin is linked to a free-to-play, Telegram-based game where users earn tokens by launching a Telegram bot and tapping on the screen. Its straightforward design has attracted 35 million total users, and peaked at over six million daily active users. However, once NOT became available on open markets, it saw a 60% drop in value, as some users wanted to monetize their taps.

As the next potential steps of Notcoin development, the project’s co-founder highlighted the burning of unclaimed NOT tokens, offering its infrastructure to third-party developers, and the launch of new games. The first game developed on the Notcoin platform is set to release in the coming weeks.

Fun fact: on May 17, 552,586 Notcoin users donated $6.8 million worth of NOT to Telegram founder Pavel Durov as “tokens of appreciation.” Durov stated he would hold these tokens until their value reaches $680 million. This move looks like an inverted Shiba Inu story, which happened the same day three years ago.

One sentence news

  • Gemini Earn is set to start distributing held customer funds by the end of this month, following the court’s approval of Genesis’ bankruptcy.
  • Uniswap Labs and Across Protocol introduced ERC-7683, a new Ethereum token standard that aims to simplify cross-chain transactions and interoperability.
  • Web3 platform Gala Games suffered a $200 million exploit, which temporarily plummeted its GALA token by nearly 15%.
  • U.S. Senators passed a resolution nullifying the SEC’s crypto rule, which requires banks to keep customers’ digital assets on their balance sheets, alongside capital maintained against them.
  • IOTA announced the launch of its “IOTA 2.0” testnet, which will enable the network’s migration from proof of work (PoW) to proof of stake (PoS).
  • Worldcoin migrated to a new open-source system to improve the protection of sensitive information, and, in doing so, reportedly deleted older iris codes it had previously collected.

How is Bitcoin doing?

The Ether ETF speculation brought increased optimism across the entire crypto market, boosting Bitcoin’s price performance as well. The BTC price temporarily climbed above $71,000, before consolidating within a narrow range. Another catalyst, which arguably reestablished BTC’s rally, is a renewed interest in U.S. spot Bitcoin ETFs. Last week, they registered the largest weekly inflow since March, and currently maintain net inflows throughout this week.&

The falling wedge pattern, which we covered last week, has almost worked out, as its price target remains near $74,000, and/or the asset’s all-time high. According to CryptoQuant, the amount of Bitcoin stored on crypto exchanges reached a seven-year low, fueling speculation about a potential supply shock. However, if bears take the initiative, the crossover point of 20-day EMA and 50-day SMA could act as a potential support level.

Other notable price performances

  • Ethereum-related tokens, including UNI, ARB, and LDO, dominated the top gainers club.
  • PEPE continued to update its all-time high, registering a more than 35% jump.
  • LINK surged by almost 20%, following a report that the world’s largest settlement system completed a data tokenization pilot program for U.S. banks with Chainlink’s technology.
  • AI tokens, including NEAR and GRT, experienced one-digit gains ahead of Nvidia’s earnings report.

Tune in next week, and every week, for the latest CEX.IO crypto highlights. For more information, head over to the Exchange to check current prices, or stop by CEX.IO University to continue expanding your crypto knowledge.

Disclaimer: For information purposes only. Not investment or financial advice. Seek professional advice. Digital assets involve risk. Do your own research.

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