Main topics of the post:
The approval of ether (ETH) spot ETF applications in the United States marks a monumental shift in the cryptocurrency regulatory landscape, increasing the legitimacy of digital assets beyond bitcoin.
Binance witnessed record ETH trading activity following the news, reflecting the market's enthusiastic response and continued confidence in the platform during pivotal events.
In the days leading up to approval, Binance saw an 80% increase in institutional registrations, which can also be seen as evidence of accelerating legitimization of Ether and cryptocurrencies more broadly among professional investors.
The end of May was rich in significant regulatory and political developments for cryptocurrencies. On May 23, the same day the U.S. House of Representatives passed a bill that aims to create a new legal framework for digital assets, the Securities and Exchange Commission (SEC) took a significant step toward allowing ether trading ( ETH) spot by exchange-traded funds. While specific products have not yet been authorized for trading, the SEC's approval of brokerage applications signals a monumental shift.
This decision, which should fully materialize in the coming weeks or months, maintains substantial symbolic and market-moving potential. The development, which came as a surprise to many observers, represents a shift in the broader narrative, highlighting the growing legitimacy of digital assets beyond Bitcoin.
The SEC's move immediately had repercussions throughout the market. Traders and investors responded enthusiastically to the news, which was evident in rising prices, increased demand, and record activity on Binance. As traders flocked to our platform, we successfully processed a massive volume of ETH trades, recording some notable activity metrics in the process.
With over 200 million people trusting us to facilitate their crypto journeys, every event that has significance for the global crypto community is imprinted on user activity patterns on Binance – and this time was no different.
Legitimizing cryptocurrencies beyond Bitcoin
The approval marks another critical step in the legitimization of digital assets by regulators and institutional investors, particularly assets other than BTC. The recent approval of BTC ETFs in January was a significant milestone for general adoption, setting the stage for broader acceptance of cryptocurrencies. However, the original cryptocurrency has always enjoyed a unique status among digital assets, and it was not immediately clear whether others can hope for similar treatment. Now that regulated spot ETFs tracking another blue-chip token are on the horizon, the picture looks much more promising.
Notably, the ETF products mentioned in the SEC ruling were defined as "commodity-based trust shares", suggesting a possible change regarding the categorization of Ether as a security. This reclassification could have profound implications for ETH – and potentially other assets – in its regulatory treatment and broader market perception globally.
Immediate and long-term market effects
In the short term, the approval of ETH ETFs triggered a significant increase in prices and increased demand for ETH. However, as was the case with the approval of BTC ETFs in January, the impacts of this decision will likely also continue to be felt in the long term, strengthening the already growing adoption of cryptocurrencies by the general public and institutions.
In addition to increased adoption, this development has the potential to reshape the fundamental economics of the crypto ecosystem, especially in relation to staking. If substantial amounts of ETH are locked in ETFs but not staked, this could lead to a reduction in market supply, driving up prices due to increased demand from investors who prefer regulated products.
At the same time, the rising value of ETH could make staking more attractive, but the scarcity of ETH available for staking could put additional upward pressure on prices. In such a virtuous cycle scenario, ETF holders would benefit from the appreciation of the asset.
Tangible enthusiasm in the market
As expected, the community reaction to the approval of the ETF has been energetic. ETH transaction volumes began to increase when the news broke on May 20: according to data from CryptoQuant, the number of transactions increased from 6.6 million that day to 9.8 million on May 28 — a 48% increase. This increase indicated increasing engagement and activity on the Ethereum network, driven by positive sentiment surrounding the news.
Interestingly, a significant advance in prices occurred a few days earlier, starting on May 20, when ETF analysts at Bloomberg reassessed the spot ETF's approval odds from 25% to 75%. The price of ether rose from around $3,080 on May 20 to a high of $3,910 on the day of approval, and rose above $3,950 in the days that followed. Still, the all-time high above $4,800 reached in November 2021 remained out of reach.
Fonte: CryptoQuant
However, the increased interest in ETH is not just for the purpose of making a short-term profit from rising prices. According to CryptoQuant analysis, demand for ETH was significantly bolstered by Permanent Holders – addresses that accumulate ETH without selling – who purchased over 100,000 ETH on May 20, marking the highest daily level since September 2023.
Supporting this uptrend was the increase in open long positions in the futures market. Total Ether open interest, which represents the total number of active positions in a specific contract in the derivatives market, increased from 2.8 to 3.2 million ETH in a few hours on May 20.
Historic ETH week on Binance
Following the ETH ETF news, Binance saw record ETH trading activity. Net Taker Volume, an important metric that measures the difference between buy and sell volume through market orders, increased dramatically as Binance users began executing significant long positions on May 20, 2024.
Fonte: CryptoQuant
Furthermore, within just one chart candle, Taker Buy Volume exceeded Taker Sell Volume by $530 million — the largest ETH candle ever recorded on Binance. On the Net Taker Volume chart, this dynamic is represented by the towering green bar on the far right, accompanied by a very short downward-facing red sell taker bar.
During this period, Ether inflows on Binance were also notable. On May 21, Binance recorded net inflows of 145,777 ETH, the highest daily net inflow since May 2023, and continued strong in the following days. Notably, it wasn't just retail traders who drove this increase. Between May 19th and May 23rd, the day of SEC approval, we saw an 80% increase in institutional registrations on Binance, which supports the idea of greater legitimization of Ether and cryptocurrencies more broadly among institutional investors.
Fonte: CryptoQuant
In addition to indicating increased interest in ETH, this increase also highlighted the crypto community's trust in Binance as the platform of choice to facilitate their trading needs during key market events.
Richard Teng, CEO of Binance, celebrated the news of the approval of the ETH spot ETF with the crypto community:
This is a key development that signals the growing recognition and broader acceptance of digital assets within traditional frameworks, particularly in an influential market like the US. It adds to an already active market for digital asset ETFs. We are optimistic that this latest step forward will lead to greater regulatory acceptance, paving the way for widespread adoption of digital assets globally — whether for ETH, BTC or others.
As retail traders and institutional investors enthusiastically respond to regulatory developments, Binance continues to build the robust infrastructure necessary to support this growing demand from a rapidly expanding user base.