Ethereum Derivatives Market Flat Despite Imminent ETF Launch
Ethereum (ETH) experienced a notable rally in the past week, gaining 10.4% to reach up to $3,500. However, it encountered strong resistance at the $3,500 mark, and is currently trading at $3,416, down 0.20% in the past 24 hours. The United States Securities and Exchange Commission (SEC) approved two additional spot Ethereum exchange-traded funds (ETFs). Despite this seemingly positive development, the derivatives market for Ether has shown minimal excitement.
The SEC has reportedly granted preliminary approval to at least three issuers to start trading spot Ethereum ETFs on July 23, with a total of eight waiting for final regulatory approval. Matt Hougan, Chief Investment Officer at Bitwise, is optimistic about Ether’s price hitting $5,000 by the end of 2024. He cites factors such as Ether's low inflation rate, minimal costs for validators, and the fact that 28% of its supply is locked in staking.
Despite these forecasts and the overall crypto market capitalization increasing by 43% year-to-date in 2024, Ethereum investors remain surprisingly cautious. Typically, futures contracts should trade 5% to 10% higher than spot markets due to their extended settlement periods. Currently, the annualized premium for Ether's fixed-month contracts stands at 11%, indicating moderate optimism. However, this indicator has not maintained levels above 12% in the past month, raising concerns given the expected inflows from the upcoming spot ETF launch in the US. Similarly, Bitcoin’s basis rate also stands at 11%, suggesting no excessive bullishness among Ethereum investors.
From a macroeconomic perspective, the latest US Producer Price Index showed a 2.6% increase over the previous year, slightly above the anticipated 2.3%. This indicates that the US Federal Reserve still faces challenges in controlling inflation, which could continue to dampen demand. Furthermore, China's disappointing annual GDP growth of 4.7% could have negative implications for global stock markets.
