How Ethereum ETFs Will Help ETH Finally Cross $4.5K

• Ethereum’s recent rally has followed a significant price rally, and ETF approvals are seen as bullish.
• Market volatility and trading activity suggest a complex, potentially bullish future for Ethereum.

Ethereum [ETH]the leading cryptocurrency and blockchain platform, has shown significant market activity in recent weeks.

After a significant rise of approximately 31.5% over two weeks, taking its value to over $3,900, Ethereum has seen a slight rebound, to around $3,845.

This fluctuation comes amid broader market movements and regulatory developments that may affect the asset’s future trajectory.

Crypto research firm Kaiko has illuminate to these events, with a special emphasis on the potential impact Approval by the US Securities and Exchange Commission (SEC). spot Ethereum ETFs.

This approval is seen as a positive step for Ethereum, despite potential short-term market adjustments.

The implications of such regulatory progress go 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 Ethereum ETFs could initially cause selling pressure due to potential outflows from existing investment vehicles such as Grayscale’s Ethereum Trust (ETHE).

The company currently manages over $11 billion in assets.

Historical data from similar scenarios suggests that such outflows could significantly affect daily trading volumes.

However, as seen with Bitcoin ETFs, the initial outflows were eventually offset by subsequent inflows, indicating a possible stabilization after the ETF’s launch.

Will Cai, Head of Indices at Kaik, emphasized the broader implications of the SEC’s decision, noting that it is a declaration of Ethereum’s status as a commodity, not a security.

This classification not only affects Ethereum’s trading and custody, but also sets a precedent for the regulation of similar tokens in the US, possibly fostering a more stable regulatory environment.

Meanwhile, according to Kaik, Ethereum’s market depth on centralized exchanges was approximately $226 million at the time of the report – 42% lower than pre-FTX collapse levels.

Only 40% of that is aimed at US stock markets, down from around 50% in early 2023.

Source: Kaiko

The research firm noted:

“Overall, even if inflows disappoint 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.”

Insight into volatility

Further insights from Kaik highlighted Ethereum’s volatility trends. In particular, Ethereum’s implied volatility increased dramatically in late May, indicating increased market activity and investor interest.

This was accompanied by an inversion in the volatility pattern, where short-term volatility exceeded longer-term expectations — a common indicator of market stress or significant trading activity.

Source: Kaiko

In the derivatives markets, Ethereum has shown remarkable dynamics.

Funding rates for Ethereum’s perpetual futures have seen a sharp rise from the lowest in more than a year to a multi-month high in just a few days.

At the same time, open interest on those futures reached a record $11 billion, indicating strong capital inflows and increased trading activity.

Source: Kaiko

Despite these promising signs, some indicators suggest caution.

Is your portfolio green? Check out the ETH profit calculator

AMBCrypto’s look at Glassnode’s data points to 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 turned a high level of resistance into support, potentially setting the stage for further gains and a possible break above the $4,000 mark.

Source: TradingView