On May 23, the U.S. Securities and Exchange Commission (SEC) approved an Ethereum exchange-traded fund (ETF), but actual trading of these products on U.S. markets will take longer as regulators have yet to approve each of the eight funds. It will take. Submit individual S-1 documents. Given the uncertainty, Ethereum (ETH) price has struggled to break above the $3,900 resistance level, and the answer may lie in the Ethereum futures market.
Ethereum Spot ETF Uncertainty Regarding Launch Date and Potential Outflows
Even for those who assume the launch of an effective spot ETF in the U.S. is imminent, part of the discomfort among Ether investors stems from the conversion of the Grayscale Ethereum Trust (ETHE) into a spot product. If the fund manager decides to keep the $11 billion fund’s fees well above existing fees, the result would mirror Grayscale’s GBTC outflows, offsetting inflows from rivals including BlackRock, Fidelity, VanEck and ARK 21Shares. .
Some analysts have argued that the SEC’s decision to approve Ethereum spot was largely influenced by last-minute political pressure from Democrats seeking to secure swing voters in the US presidential election this November. However, analysts note that because the SEC was aware that Ethereum tools shared the same regulatory setup as spot Bitcoin ETFs, “the SEC took a more pragmatic approach and avoided a legal fight,” according to analysts at Bernstein. .
Traders are debating whether bullish bets are being made through the ETH derivatives market, or whether Ether prices are being artificially suppressed because on-site Ether ETF bets are taking longer than expected. This uncertainty stems from mixed signals from the cryptocurrency market, particularly US President Joe Biden’s recent action to veto a congressional resolution to repeal the SEC’s SAB 121 guidance, which has raised concerns about the regulatory environment for cryptocurrencies.
It is nearly impossible to predict how long it will take for the SEC to approve the required S-1 filings for each Ethereum spot ETF. Therefore, after several failed attempts to keep the price above $3,900, traders need to pay attention to trading indicators to understand if there is a bearish trend. Perpetual contracts, also known as inverse swaps, contain an implied interest rate that is recalculated every eight hours. In other words, a positive ratio indicates that buyers (buyers) prefer higher leverage to be utilized.
Aside from a brief spike of close to 0.03% per 8 hours on May 21st (equivalent to 0.6% per share), funding costs for ETH leverage have been minimal. This means that demand is balanced between buying and selling using perpetual contracts.
Monthly ETH futures reflect investor optimism slowly fading.
To rule out externalities associated with perpetual contracts, the ETH monthly futures annual premium (base rate) should be monitored. These contracts rarely track spot Ethereum prices because they have long settlement periods and require sellers to pay a 5-10% premium. However, in good times, this difference can easily reach 20% as buyers are willing to pay a higher premium for leverage.
Ether’s monthly futures premium rose 15% on May 21 after the price of ETH rose to $3,800. However, as the indicator returned to 13% on June 3, the moderate optimism began to fade. This is still slightly above the neutral threshold, but not a sign of near-term strength.
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This data doesn’t necessarily mean investors aren’t confident in the Ethereum ETF launch scene, given the tighter regulations around the world. For example, Hong Kong has banned unlicensed exchanges in the region, Paraguay has seized unregistered cryptocurrency mining equipment, and several U.S. senators have accused Iran of using digital assets to circumvent sanctions, including funding terrorist organizations. He claimed that he was doing it.
Currently, ETH derivatives reflect low confidence in strong US spot ETF net inflows, whether the reason is delays in S-1 approval from regulators or fears of outflows from Grayscale’s ETHE products. As a result, according to ETH futures prices, the chances of it rising above $4,000 in the near term are slim.
This article is written for general information purposes and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.