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Crypto Traders Eye Ether Record, Rising Volatility Due to US ETF Hype
(Bloomberg) — Bets on further Ether gains are intensifying following a surprise U.S. regulatory shift toward allowing exchange-traded funds for the digital asset, even as questions swirl on the strength of demand for the products.
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The move by the U.S. Securities & Exchange Commission catalyzed a 26% surge in the second-largest token in the seven days leading up to Sunday, the biggest weekly advance since the 2021 crypto bull market, data shows compiled by Bloomberg.
Speculators may rejoice in the record January debut of US spot-Bitcoin ETFs, which amassed $59 billion in assets. But Ether is less well-known than Bitcoin, making investors’ appetite for exposure harder to parse.
Additionally, spot-Ether ETFs will not participate in staking, the process of earning rewards by pledging tokens to maintain the Ethereum blockchain. The omission threatens to reduce interest in the funds relative to holding the tokens.
More SEC approvals are still needed before issuers such as BlackRock Inc. and Fidelity Investments can launch products, for which the timeline is unclear. Ether rose about 1% to $3,900 as of 8:38 a.m. Monday in London, while Bitcoin was little changed at $68,500.
“Risk on Ether remains to the upside and pullbacks are a buying opportunity,” Pepperstone Group head of research Chris Weston wrote in a note.
The charts below summarize the scenarios for Ether following its 71% rise this year.
Bets on $5,000
The highest concentrations of bullish options bets indicate that some traders see Ether rising to $5,000 or even higher, according to figures from trading platform Deribit. Ether’s current all-time high is $4,866 as of November 2021.
Volatility ahead
The gap between the T3 Ether Volatility Index – which uses options prices to give a sense of the token’s expected 30-day fluctuations – and a similar gauge for Bitcoin is about the widest since at least the start of 2023. This indicates that speculators expect greater fluctuations in Ether than those of the largest digital asset.
Indices on demand
Some analysts view demand for futures contracts hosted by Chicago-based CME Group Inc. as a window into U.S. institutions’ appetite for regulated crypto exposure. The level of open interest – or contracts in progress – is increasing for CME Ether futures but is much lower than for CME Bitcoin futures, suggesting less institutional engagement with Ether and perhaps, by extension, with future Ether ETFs.
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“Relatively low participation from the same institutions likely to flock to the spot Ether ETF at launch suggests that initial inflows could be disappointing,” wrote Noelle Acheson, author of the Crypto Is Macro Now newsletter.
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