Ethereum Jumps 25%: Derivatives Market Reacts With High Volatility

Following the approval of spot Ethereum ETFs, sentiment around the leading altcoin has significantly shifted. The SEC’s greenlighting, after a prolonged period of delay, ignited a market frenzy, propelling the price of ETH by over 25%. This positive regulatory move coincided with two major regulatory events: the US House passing its first comprehensive crypto bill and the UK approving crypto exchange-traded products.

It’s important to highlight that while the SEC has approved 19b-4 filings from NYSE, Cboe, and Nasdaq, it still needs to review S-1 forms from issuers such as BlackRock, Fidelity, and VanEck, which delays the commencement of trading. Nevertheless, this approval signals that the regulator classifies Ethereum (without staking) as a commodity, a decision that could favorably impact the regulation of similar tokens in the US.

Commenting on this significant development, Will Cai of Kaiko, a leading data provider, noted, “With these approvals, the SEC implicitly stated that ETH (without staking) is a commodity rather than a security. This isn’t just about access to ETH, but has significant and likely positive ramifications on how all similar tokens will be regulated in the U.S. with respect to trading, custody, transfer, etc.”

Crypto Market Shaken As Ethereum Volatility Surges

Kaiko’s analysis highlighted several notable market trends following the ETF approval. Nonetheless, many regard the ETF approval as a beneficial move towards mitigating regulatory uncertainty for Ethereum. Firstly, ETH’s implied volatility and activity in derivatives markets have significantly increased, evidenced by record highs in perpetual futures funding rates and open interest.

Moreover, the potential market effects of Grayscale’s upcoming ETH redemptions add an element of unpredictability. Nonetheless, many regard the ETF approval as a beneficial move towards mitigating regulatory uncertainty for Ethereum.

Open interest [blue] reached a record high of $11 billion, showing strong capital flows into the market. The ETH to BTC ratio, which compares how the two assets perform, also jumped from 0.044 to 0.055, though it stayed below the February peak. When looking at Ethereum Cumulative Volume Delta [CVD], the rise was widespread, with both US and offshore spot markets seeing strong buying since May 21. Before that, offshore exchanges were mostly seeing net selling.

Furthermore, the author’s views are for reference only and shall not constitute any investment advice. Please ensure you fully understand and assess the products and associated risks before purchasing.