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Can Spot ETFs Push Ethereum (ETH) Price Past $4,000?
Ethereum (ETH) experienced volatility mainly due to its alignment with broader market trends.
Despite the approval of spot ETH ETFs, the event has yet to impact the price. However, this could change in the near future.
Do Ethereum ETFs Have a Bright Future?
The movements of spot ETFs could have a significant impact on the price of Ethereum in the coming months. Earlier this week, the U.S. Securities and Exchange Commission (SEC) approved listing of spot ETFs by early JulyThis has significantly increased investors’ expectations.
“We expect net inflows into ETH ETFs to account for 20-50% of net inflows into BTC ETFs in the first five months, with a target of 30%, implying $1 billion/month in net inflows,” VP of Galaxy Research Charles Yu declared.
However, these optimistic predictions do not seem entirely realistic. To put things into perspective, spot Bitcoin ETFs saw just $857 million in inflows as of June 21, despite holding 84% of the total ETF market share, with eventually ETFs represent only 14%. This raises doubts about whether Ethereum spot ETFs will reach $1 billion in monthly inflows.
Learn more: Ethereum ETF explained: what it is and how it works
Bitcoin ETF Spot Market Share. Source: The block
Uncertainty over the success of ETH ETFs in a relatively bear market could also lead to higher market maker bonuses. Gamma distribution risk, involving the sensitivity of options to price changes, encourages market makers to adjust their strategies. Given the added uncertainty associated with ETH ETFs, they are likely to increase premiums to cover possible extreme price swings.
“ETH can still get effective support from market makers who are hedging on the downside. As a solution to the gamma distribution risk mentioned above, market makers have also slightly increased their tail risk pricing. Due to the added uncertainty brought by ETH ETFs, ETH tail risk pricing is relatively high,” Griffin Ardern, Head of BloFin Research & Options, told BeInCrypto.
In other words, market makers could charge more to account for the risk of the price of ETH being affected by a very unusual and extreme event. This means investors have to pay more to hedge their bets, which can discourage excessive speculation and reduce volatility.
Learn more: How to invest in Ethereum ETFs?
Although active risk management can help stabilize its price by providing support and mitigating significant price declines, Ethereum price may struggle to benefit immediately upon the launch of spot ETFs.
ETH Price Prediction: Heading to New Highs
Ethereum price of $3,395 far from established a new all-time high. The second-largest cryptocurrency rallied more than 30% after the ETH spot ETF was approved, but nearly half of that gain was erased when ETH fell 13% earlier this month. Uncertainty surrounding the launch pushed the price down, along with bearish signals from the broader market.
The situation could change as the market gets closer to the launch of ETFs. The price of Bitcoin started to rise after the introduction of its spot ETFs, and a similar result is expected for Ethereum.
If Ethereum price managed to capitalize on the potential upside and move to $3,829 support, it would have managed to move the 61.8% Fibonacci retracement into support. This line, also known as the bull market support floor, would result in further gains for ETH.
Learn more: Ethereum (ETH) Price Prediction 2024/2025/2030
Even if a new historical record is still far away, ETH will at least have a chance attempts to break above $4,000. A successful breakout will be key to pushing the altcoin even higher.
But if this does not happen, Ethereum price risks remaining consolidated below $4,000. The likely support level could be between $3,700 and $3,800. Losing this would invalidate the bullish thesis.
Disclaimer
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