Approval of ether funds part of 'American turnaround'?

The decision has been made. Contrary to initial expectations, the requested spot ether ETFs have been approved by the US regulator. What does this mean for the price of ether? And in what context should the approval be placed? More on this in this Weekly!

This Weekly in brief:

• Market: With the approval of the Ethereum ETFs, the entire crypto market rebounded. The price of bitcoin was around $69,000 last week, and ether is approaching $4,000. However, the correction is not over yet; we still need a 5 to 10 percent increase to surpass the starting point of the correction.
• News: The rebound of the crypto market is widely related to a shift in US politics. A series of events is forcing the Democrats to take a constructive stance towards crypto.
• Behind the scenes: On June 20th and 21st, we'll be attending The Next Web Conference in Amsterdam. Will we see you there?

Market update

"BOOM!! APPROVED! There it is." — Thursday evening, just after 11 p.m., the SEC posted a document online approving the 19b-4 forms of eight applicants, including BlackRock and Fidelity. While just a week earlier, hardly anyone expected the imminent arrival of spot ether ETFs, it is now almost certain that they will come.

"One of the biggest policy reversals in SEC history, and evidence that the 'crypto crowd' has become a legitimate voting bloc," Fox journalist Charles Gasparino described the approval of the Ethereum funds.

The price of ETH benefited significantly from this turnaround. Last Monday, we approached the psychologically important $4,000 mark, standing 40% higher than two weeks ago. Even after the approval, ETH continues to perform well. In comparison to the rest of the crypto market, the coin has gained ground in recent days.

However, the correction is not over yet. To do so, we must first rise above the correction's starting point. For ETH, that point is $4,100, and for BTC, it's $73,800, both of which are still about ten percent away. This means that both options are still on the table: a swift end to this correction and new record highs, or a continuation of this correction.

The first scenario doesn't seem very likely. Even after the approval of the ether ETFs and the shift in US politics, the crypto market remains somewhat sluggish. There is no great excitement. Trading volume on exchanges and transaction volume on the blockchain remain at a standstill.

Until enthusiasm among investors returns, we also consider the second scenario: a longer period of prices in the current range between $60,000 and $73,800.

We saw something similar last summer when we traded sideways between $25,000 and $32,000 for seven months. At the end of June and beginning of July, the price briefly touched the upper limit but then visited the lower end of the price range for months before a definitive breakout occurred at the end of October. History never repeats itself the same way, and hopefully, it won't last seven months this time, but it doesn't hurt to consider this scenario as well.

The chart below shows the price of bitcoin since the bottom of the bear market. In that thick year and a half, we've had four periods where the price was trapped in a price range for a long time. This time it has been three months already. The good news is that we have had a typical correction, and we are above the averages that separate the declining and rising periods from each other.

News overview

After the approval of the ether funds, analysts rushed to provide interpretation. Unlike usual, they are quite unanimous in this: the regulator caved under political pressure.

By combining all the analyses, it becomes clear that this political context consists of more events than just the approval. We've put them in chronological order for convenience.

Thursday, May 16. For the first time in US history, a crypto law has been pushed through the entire political process. Both political chambers put a stop to a measure by the SEC that would prevent banks from participating fully in the crypto world.

Friday, May 17. Conversations with Democratic senators who voted with the Republicans indicate that they wanted to send a signal. Support for the fight that prominent Democrats are waging against the crypto market has weakened.

Monday, May 20. During the day, which was evening in the Netherlands, ETF specialists unexpectedly adjusted their expectations for the requested ether funds. This went from probably not - "it’s just not happening guys" - to probably yes in one fell swoop.

Tuesday, May 21. Rumors of the sudden turnaround by the regulator were confirmed. Like in January with the bitcoin funds, the applicants were guided to the green light with feedback from the regulator.

On the same day, former President Trump definitively made crypto a focal point in his campaign. It was revealed that he accepts donations in cryptocurrency. Meanwhile, it is clear among Democrats that the millions of crypto holders are a force to be reckoned with, especially in the traditionally decisive states.

Wednesday, May 22. Once again, an important bill for the crypto world is on the table in the House of Representatives. Just before midnight, FIT21 was passed by a large majority. A total of 71 Democrats voted in favor, despite warnings from Gensler and the White House. Another undeniable signal for the party leadership.

Thursday, May 23. The day of reckoning for the requested ether funds. Deep into the night, the 19b-4 forms received the regulator's blessing. The main hurdle has been cleared; the remainder of the procedure is seen as easy and trouble-free. Approved!

Friday, May 24. The approval of the ether funds is widely celebrated in the crypto world. Among analysts, there is quick consensus that political pressure was part of the swift agreement. JPMorgan's interpretation: "We see this ETF approval, and crypto in a broader sense, as an increasingly important political issue for the 2024 presidential elections."

And thus, we arrive at the present. Last weekend, Trump strengthened his claim on the crypto dossier, ETF analysts marveled at the regulator's turnaround, and some revelers read for the first time the bill that successfully passed through the House of Representatives on Wednesday. And although there are many criticisms, the signal function of it prevails: the White House must take a constructive stance towards crypto, whether they like it in Washington or not!

Other news:

• Wealth giant Franklin Templeton expects all ETFs to move to blockchains. CEO Jenny Johnson discussed this at the annual Milken Institute conference. Their experiments show that blockchain technology is faster and cheaper for hosting traditional financial products. "This will unlock many new investment opportunities," said Johnson.

• ESMA is considering allowing bitcoin in the market for UCITS investment funds. This would mean that fund managers could allocate a small portion of their investments to bitcoin. The European regulator is seeking public feedback until August 7 before making a final decision. There are still legal challenges, including how bitcoin should be stored under current EU rules. The total value of the UCITS market is 12 trillion euros.

• MetaMask is adding support for bitcoin. The popular Web 3 wallet plans to add bitcoin support within a month, a significant step in expanding beyond the Ethereum world. Speculators hope this will boost trading in ordinals and runes, which have faded into the background after a tumultuous launch.