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The narrative of Bitcoin spot ETFs is still continuing. Against the backdrop of Bitcoin’s surge, Ethereum is not willing to stand out in a lonely way.
From the perspective of the external environment, the narrative of ETFs has come to Ethereum again. In addition to Grayscale, six institutions including BlackRock, Fidelity, VanEck have submitted applications for issuance of spot ETFs to the SEC, and will usher in March.The latest wave of approval.
In terms of internal conditions, the certainty of Ethereum is positive for Cancun. The resurgence of the re-staking agreement at the beginning of the year also attracted much attention from Ethereum, which has been silent for a long time.On February 20, Ethereum price exceeded US$3,000 for a short time, setting a record high since April 2022.
Judging from the various performances, the spotlight on the stage seems to have really shone on Ethereum.
The game of ETF, this time we came to Ethereum
Bitcoin broke through $53,000 in this box, and Ethereum is not to be outdone.On February 20, Ethereum broke through $3,000 in a short period of time. Although it subsequently fell to around $2,900 and is now at $2,958, it has successfully set a record in the past two years.In fact, slightly different from Bitcoin leading the market growth in 23 years, Ethereum drives surpassed Bitcoin this year alone, as of February 22, Ethereum rose 28%, while Bitcoin rose 21%..It can be seen that from a certain perspective, the current crypto narrative is gradually turning to Ethereum.
Ethereum price trend in the past 7 days, source: OKX
From a narrative perspective, there are two main driving factors for Ethereum: one is the wave of application for spot ETFs, and the other is the upcoming upgrade of Cancun.The most important thing at this stage is undoubtedly the ETF that can attract traditional funds to enter the market.
From the perspective of Bitcoin, since 11 Bitcoin spot ETFs were criticized, although Bitcoin has experienced a short-term profit-making sell-off, with the support of institutions, more than US$5.2 billion has been inflowed into the Bitcoin ETF market, driving Bit’s ability to do so, with the support of the institutions, driving Bit’sThe currency successfully recovered lost land and is now at $51,759.
It is precisely because of the successful experience of Bitcoin ETFs that the narrative of Ethereum ETFs has also attracted widespread attention.Up to now, in addition to Grayscale’s application for convertible spot ETFs in its original trust, six other institutions including BlackRock, Fidelity, Invesco, Hashdex, 21shares, VanEck, etc. have submitted applications for Ethereum spot ETFs.Previously, the SEC postponed the first and second rounds of applications for all applicants. The current approval date is March 5, and the latest approval date is July, with March and May being the intensive approval period.
List of Ethereum spot ETF applications, source: Bloomberg
Looking at the application process of Bitcoin, the approaching approval date is actually the period when prices are most likely to rise and accumulate. This is also a reason for the short-term rise of Ethereum.From the external environment alone, Ethereum has a very similar situation to Bitcoin before. First, futures ETFs have been criticized and listed as a regulated futures contract on the Chicago Commercial Exchange; second, the application institutions are quite consistent.All of them have entered large financial giants.
However, from the perspective of the prediction of approval results, there are still differences in the prediction caliber in the industry.Institutions based on the passable generally adhere to the argument that futures have passed and it is difficult to reject spot. After all, in the Bitcoin application, it was this point that successfully promoted the passage of Bitcoin spot ETFs.Bloomberg analyst Eric Balchunas said that the probability of Ethereum ETF being approved is 70% because the SEC cannot refuse spot ETFs based on the passing of futures ETFs, otherwise it will lead to lawsuits.Brokerage Bernstein said the likelihood of Ethereum spot ETF being approved in May is about 50%, and will almost certainly be approved in the next 12 months.Standard Chartered Bank directly believes that the SEC will approve the Ethereum spot ETF on May 23.
From the perspective of rejection, the current situation facing Ethereum is slightly different from Bitcoin, and the core is the issue of Ethereum’s attribute recognition.
In the cryptocurrency world, the dispute between commodity theory and securities theory has been protracted. Securities theory usually means compliance with stricter supervision. Ethereum, as one of the typical examples of mainstream coins, has great qualitative representation.In public, the SEC has made it clear that Bitcoin is a commodity, but because of its characteristics such as staking and interest generation, SEC Chairman Gary Gensler said in March last year that according to US law, tokens using staking agreements should be considered as securities.
But it is worth noting that in Binance’s lawsuit last year, the SEC clearly listed more than ten tokens as securities, including but not limited to Solana (SOL), Cardano (ADA), Polygon (MATIC), and Coti (COTI), Algorand (ALGO), Filecoin (FIL), Cosmos (ATOM), Sandbox (SAND), Axie Infinity (AXS), Decentraland (MANA).However, throughout the lawsuit, the SEC did not mention Ethereum, and when asked about its attributes, the SEC chairman avoided talking about it, which made Ethereum’s regulatory attributes increasingly confusing.
Against this background, many institutions believe that the approval of Ethereum spot ETFs is difficult to say.A JPMorgan Chase report said that the Ethereum spot ETF is unlikely to be approved in the next three months, supporting the idea of classifying Ether as a commodity, but believes that the US SEC is unlikely to make a decision by May.andRegarding the argument that the Ethereum spot ETF will be approved by the end of March 2024, Bloomberg analyst James Seyffart said bluntly on the X platform, “I bet this won’t happen with 4 ETHs.”
The debate continues to this day.Just recently, the US SEC solicited opinions on the application to convert Grayscale Ethereum Trust (ETHE) into spot ETF.Coinbase, from a legal, technical and economic perspective, describes the reasons why the SEC should approve the application, which believes that the current market consensus has made it clear that ETH is a commodity rather than a securities, while emphasizing the proof of interest of ETH.(PoS) has significant governance capabilities and demonstrates strong characteristics in ownership concentration, consensus, liquidity and governance, thus reducing the risk of fraud and manipulation.Economic theory also shows that ETH and BTC are both elastic in meeting SEC ETP approval standards and can deal with system and market risks.
Of course, the SEC has not responded to this yet.
Cancun upgrade, Ethereum’s definite narrative
Compared with the spot ETFs that are still in the game, Ethereum’s second largest narrative is quite clear – Cancun upgrade (Dencun).
Upgrading is one of the important drivers of Ethereum over the years, especially after switching to POS, upgrades usually benefit many scalability sectors.Looking at the price performance of each upgrade proposal, Cesare Fracassi and Moazzam Khoja of the University of Texas at Austin believe that Ethereum prices will rise by 18% in the weeks leading up to the last Ethereum call ahead of the main proposal.The facts are basically the same. When Shanghai upgraded last year, despite facing pledge unlocking selling pressure, Ethereum price rose to $2,100 instead of falling.
Ethereum price trend in the past year, source: OKX
Specifically, the Cancun upgrade was originally scheduled to be in October 2023, and it has been postponed for various reasons. According to the latest news, the Cancun upgrade is planned to be carried out on March 13, 2024. For this reason, the Ethereum client Geth hasThe v1.13.12 version was released on February 9, laying the foundation for the Cancun hard fork on the Ethereum main network.This upgrade is the key to Ethereum’s further expansion, which can increase the transaction volume that the Ethereum network can respond to per second, and will also open a new stage of development of Ethereum data storage and retrieval capabilities.After the upgrade is completed, the Gas fees required for digital asset transactions on the Ethereum Layer2 network will be significantly reduced, with a decrease of 14 times.It can be seen that the performance improvement brought about by the upgrade will greatly benefit the long-term development of Ethereum.
In addition to the upgrade, the popularity of re-staking agreements in recent months has also driven the market’s attention to Ethereum.According to DefiLlama data, after the staking ceiling was temporarily lifted, the re-staking agreements grew rapidly and are currently ranked sixth among many agreements, with a total TVL of over US$6.99 billion.Taking the typical project EigenLayer as an example, EigenLayer’s TVL grew from US$2.15 billion on February 5 to US$6.05 billion on February 10.
The hype of Ethereum has begun
With the above expectations, Ethereum has lived up to expectations and has once again exceeded US$3,000.From the market perspective, large institutions have also used actions to show the bullish trend towards Ethereum. According to the on-chain tracker Spotonchain, a large number of whales have begun to hoard Ethereum. Data shows that about 65,000 have been purchased by unknown wallet addresses in the past three days.ETH.The supply of stablecoins also reflects a similar trend. DefiLlama data shows that since January 1, the supply of Ethereum stablecoin has increased by 4.4%, from $68 billion to $71 billion.
Everything seems to be getting better, but many industry insiders have expressed other concerns.After the Bitcoin ETF passed, Bitcoin fell rapidly by 15%, and it was not until a month later that it returned to the high ground. This situation also made many people believe that the Ethereum ETF would face a huge sell-off after it passed.In addition, considering the existence of the staking mechanism, analysts from the rating agency Standard & Poor’s Global said that Ethereum ETFs may “bring new centralized risks to blockchain networks” because institutional hosting will make ETH more controlConcentrated, although the decentralized protocol Lido currently accounts for 31% of Ethereum’s share.
But anyway, the hype around Ethereum has begun.A typical data is that Ethereum price has risen 27.9% since BlackRock first submitted its Ethereum spot ETF application on November 9, 2023.Previously, after BlackRock submitted its first Bitcoin spot ETF application, Bitcoin soared by 55%.
From this point of view, before the ETF application has been implemented, opportunities and risks coexist, and participants can only remain vigilant and manage positions. After all, no matter how FOMO is outside, the final destination of profit and loss is still borne by themselves..
