Analysts at cryptocurrency analysis firm Kaiko have published an in-depth analysis on the potential impact of Ethereum (ETH) and Ethereum spot ETF approvals.
The report examines the status of ETH, including a look at how volumes and derivatives are faring following the launch of Bitcoin (BTC) ETFs last week.
According to the report, the BTC:ETH correlation fell below the all-time average of 0.71 for the first time since 2021. This occurred on the same day that Bitcoin spot ETFs began trading. For months, the two crypto assets have been diverging in price activity, as BTC has benefited from ETF hype and speculation while ETH has enjoyed a relatively muted rally.
Since the merge incident, Ethereum has had many trends, including deflation and ultrasound money, Layer 2s, liquid staking derivatives, restaking, and now ETFs with danksharding on the horizon. It also faces more competition than ever before in recent years, with Solana’s low transaction fees and airdrops sparking a resurgence in the network and pushing the SOL:ETH ratio to multi-year highs. Despite all these competing trends, potential approval of spot ETFs appears to be the strongest factor right now.
According to the report, over the past 365 days, BTC’s 100% return has surpassed ETH’s 60% return. This changed the day the BTC Spot ETF was approved: BTC fell and ETH rallied, fueling rumors that ETH might be next.
Derivatives data also shows that recent ETH movements have been driven largely by spot transactions rather than continuous futures, suggesting that aggressive speculation regarding ETF applications has not yet begun, according to analysts.
With so much hype around spot ETFs, it can be easy to forget that futures-based BTC and ETH ETFs have been trading for years.
In 2021, BITO was the first BTC futures-based ETF to list in the US and recorded one of the highest launch days ever in terms of volume for an ETF. A year after BITO’s listing, a wave of ETH futures products began trading. Although ETH futures ETFs were launched in a different market environment, there is no denying that their volumes have been disappointing. EETH, AETH, and EFUT had trading volumes of only a few million on opening day, about 1,000 times less than BITO’s $1.2 billion opening.
Trading activity for these products has not improved over time. While ETH ETF activity remained low, BTC futures ETF volume began to rise ahead of the approval of spot ETFs.
As a result, while there is some hype around ETH ETF applications, data shows that aggressive speculation has not yet begun, according to analysts. ETH trading volume rose, but derivatives markets lacked signs of traders positioning for a rally. ETH futures ETFs have also been trading slowly for several months.
*This is not investment advice.
