Is Arbitrum's Price Surge A Temporary Triumph?

[TL; DR]

The United States Securit and Exchange Commission approved Ethereum ETFs on 23 Ma.

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

ETH ETFs will increase liquidit in the Ethereum market.

Introduction

The United States SECs approval of crpto exchange traded funds (ETFs) has ushered a new era in the crptocurrenc industr as it has attracted much institutional investment. Whereas the launch of spot Bitcoin ETFs signalled the start of mainstream crptocurrenc acceptance the approval of spot Ethereum ETFs has heralded the expansion of the role of digital assets in the financial world.

Toda, we discuss the journe 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 SECs approval of spot Ethereum ETFs on 23 Ma the crptocurrenc communit responded positivel resulting in a short period surge of Ether (ETH). Several asset management firms that include Fidelit, Bitwise, VanEck, Franklin, ARK Invest and Grascale were granted the right to launch spot ETH ETFs, upon completing the required paperwork.

The Ethereum price analsis 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 ETHs price movement after the approval of the ETFs. Ethereum Price Movement after the US SECs 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 fairl high since that time as it is fluctuating above $3,600. What is also worth of recognition in the diagram is the ETH price spike that occurred on 20 Ma, 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.

Piino: Wh Ethereum's Price didnt soar Past $4,000 And the Lukewarm Rall of the ETH/BTC pair

No doubt, the crpto 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 Ma which resulted in a 0.65% rise in its market capitaliation ETH failed to breach the $4,000 resistance level. Jason Piino, a crpto analst, thinks that the investors cautious approach stalled ETHs potential price up thrust.

As per a BeInCrpto publication, Piino said, The Ethereum ETF has been approved. However, that wasnt enough to pump the price past $4,000. The ETH/BTC pair also saw a weaker than expected rall. However, some crpto analsts believe that the ETH price will likel reach $8,000 b the end of 2024 as a result of the capital inflow from the ETFs.

The market might not have responded as strongl as people expected since the ETFs are not et launched. As such, there is still limited crptocurrenc investment inflows into the Ethereum market. The reason is that the ETF issuers will need to get a go ahead from the SEC before the launch the ETFs. Therefore, it ma 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 SECs approval.

Pepe's Brief Triumph and Decline: Detailing the meme coin's immediate reaction to the ETF news

Apart from ETHs lukewarm response to the news of the US ETH ETF approval several Ethereum network-based tokens reacted in a mixed manner. The Ethereum market trends show that PEPE reacted positivel to the news since its price rose significantl to reach a new all-time high of $0.00001576. However, the bullish momentum did not last for a long period as it retraced b 8%, thereafter.

Although initiall the Arbitrum price rose it also declined b 3% within a short period. The price of Lido DAO (LDO) also soared before falling again, following PEPE, ARB and ETHs 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 initiall dropped before gaining b 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 crpto market. Now, there is much confidence that crptocurrencies are here to sta and will contribute meaningfull to the financial sector. What is significant is that the approval of both ETH ETFs and Bitcoin ETFs brought much jubilation in the crpto sector. However the process of approving bitcoin ETFs was different from that of ETH ETFs.

Basicall, the approval of bitcoin ETFs was historic since there were the first crptocurrenc ETFs in the United States. Those ETFs opened the first doors for institutional funds inflow into the crptocurrenc sector. Even the retail investors started to benefit from bitcoin as the were now able to indirectl invest in BTC without the need to manage digital wallets. Also, the crpto market viewed the approval of bitcoin ETFs as the legitimiation of not onl bitcoin, but of all digital currencies.

Towards the approval of bitcoin ETFs the SEC was more worried about the possibilit of market manipulation after their launch. Therefore, it focused on ensuring that the ETF market had necessar 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 crptocurrencies. For example, the United States and the European Union are working towards introducing crpto regulation. Much discussion has also been on whether to classif ETH as a crpto commodit or securit. Thus, the approval of ETH ETFs came during a period of greater regulator uncertaint than during the launch of BTC ETFs.

Read also: Bitcoin ETFs Have Been Trading Around the World for Years

Parallels between Ethereum and Bitcoin's ETF Approval past Market Behavior

The crpto market reacted differentl 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 crptocurrencies through the regulated financial assets (ETFs). Those who are not willing to bu ETH or bitcoin directl can now invest in their derivatives, especiall the exchange traded funds.

Trading Volumes and Price Movements: After the approval of bitcoin ETFs the BTC price surged, accompanied b high trading volumes. Similarl, 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 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 Bitcoin price 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 likel to strengthen that positive relationship. This is because the SECs approval of crpto ETFs has acted as the United States recognition of the two assets as worth investment instruments. Thus, both institutional and retail investors are likel to bu Ethereum and bitcoin in more proportional amounts than before. Also, the investors ma pour their funds in the ETH/BTC pair.

SEC's Changing Stance on Crptocurrenc ETFs

Its unsurprising that the SEC has changed its stance towards crpto 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 regulator bod on the legal basis that both ETH and BTC are crptocurrencies, 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 an other threat to crpto ETF investors. That scenario might have created confidence in the regulator bod that the same cooperative situation will continue after the approval of ETH ETFs.

Finall, there has been much political pressure for the Biden administration to adopt pro-crpto 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 crptocurrenc sector. Such political pressure might have loosened the SEC hard stance against crpto assets.

The Role of ETFs for Crpto Investments

Crpto ETFs, which are derivatives, simplif crptocurrenc investment processes. First, the investors do not need to bu and hold crptocurrencies like bitcoin and ETH. The just benefit from their price movements through investing in ETFs. As a result, the process of investing in crptocurrencies becomes convenient and less risk. This is because there is no chance that the investors crpto assets can be stolen through hacking or other means.

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

Conclusion

After the United States SEC approved the Ethereum ETFs on 27 Ma the ETH price gained b 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 crpto ETFs is that the simplif investment in crptocurrencies. After the launch of bitcoin ETFs there was much capital inflow into the BTC market. The crpto market anticipates that after the launch of ETH ETFs there will be more institutional investment in the altcoin than before.