Highlights
The approval of ether (ETH) Spot ETF applications in the United States marks a monumental shift in the cryptocurrency regulatory landscape, improving the legitimacy of digital assets beyond bitcoin.
Following the news, Binance witnessed unprecedented ETH trading activity, reflecting the market's enthusiastic response and continued confidence in the platform during pivotal events.
In the days leading up to the approval, Binance saw an 80% increase in institutional registrations, which can also be seen as evidence of the acceleration of legitimization of ether and cryptocurrencies in general among professional investors.
At the end of May there were important regulatory and policy developments for cryptocurrencies. On May 23, the same day the US 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 step significant to enable trading of ether (ETH) Spot exchange-traded funds. Although trading of specific products has not yet been authorized, the approval of exchange applications by the Securities and Exchange Commission signals a monumental change.
This decision, which is expected to fully materialize in the coming weeks or months, has considerable symbolic and market-moving potential. The development, which came as a surprise to many observers, represents a broader narrative shift, underscoring the growing legitimacy of digital assets beyond bitcoin.
The action by the Securities and Exchange Commission has immediately had an impact throughout the market. Traders and investors have responded enthusiastically to the news, which was evident in rising prices, increased demand, and unprecedented 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 cryptocurrency experience, every event that matters to the global community is imprinted on user activity patterns on Binance, and this time was no different.
The legitimization of cryptocurrencies beyond bitcoin
The approval marks another critical step in the legitimization of digital assets by both regulators and institutional investors, particularly non-BTC assets. The recent approval of BTC ETFs in January was a major milestone for mainstream adoption, laying the groundwork for greater 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 expect similar treatment. Now that regulated spot ETFs tracking another blue-chip token are on the horizon, the outlook looks brighter for many other assets.
Notably, the ETF products mentioned in the SEC's decision were defined as "commodity-based trust shares," suggesting a possible move away from classifying ether as a security. This reclassification could have profound implications for the regulatory treatment of ETH and potentially other assets, and broader market perception globally.
Immediate and long-term effects on the market
In the short term, the approval of ETH ETFs has caused a significant price increase 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 continue to be felt in the long term, strengthening the already growing adoption of cryptocurrencies by the general public and institutions.
Beyond wider adoption, this development has the potential to reshape the fundamental economics of the cryptocurrency ecosystem, especially in relation to staking. If large 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 this 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 ETFs has been strong. ETH transaction volumes began to increase when the news hit on May 20: according to data from CryptoQuant, the number of transactions skyrocketed from 6.6 million that day to 9.8 million on May 28, an increase of 48%. This rally indicates the growing engagement and activity within the Ethereum network, driven by the positive sentiment surrounding the news.
Interestingly, a major price rally occurred a few days earlier, starting on May 20, when Bloomberg ETF analysts reassessed the approval odds for spot ETH ETFs from 25% to 75%. The price of ether rose from around $3,080 on May 20 to a high of $3,910 on the approval day, rising further above $3,950 in the following days. Still, the all-time high above $4,800, reached in November 2021, remained out of reach.
Fuente: CryptoQuant
However, the growing interest in ETH is not only aimed at making short-term profits from rising prices. According to CryptoQuant analysis, ETH demand was significantly boosted by permanent holders (addresses that accumulate unsold ETH) purchasing over 100,000 ETH on May 20, marking the highest daily level since September 2023.
This bullish trend was favored by 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 rose from 2.8 million to 3.2 million ETH in a matter of hours on May 20.
Historic ETH Week on Binance
In the wake of the ETH ETF news, Binance has seen unprecedented ETH trading activity. Net taker volume, a key metric that measures the difference between buying and selling volume via market orders, spiked sharply when Binance users began executing significant ETH long positions on May 20, 2024.
Fuente: CryptoQuant
Additionally, in just one candle, taker buying volume exceeded taker selling volume by $530 million, the largest ETH candle of its kind 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 red taker sell bar facing downwards.
Ether inflows into Binance have also been notable in this period. On May 21, Binance recorded a net flow of 145,777 ETH, the largest daily net flow since May 2023, and remained strong in the following days. It is worth noting that not only retail traders drove this increase. Between May 19 and May 23, the day of the SEC approval, we saw an 80% increase in institutional registrations on Binance, supporting the idea of greater legitimization of ether and cryptocurrencies among institutional investors.
Fuente: CryptoQuant
In addition to indicating increased interest in ETH, this surge also highlighted the crypto community's confidence in Binance as the preferred platform to meet their trading needs during key market events.
Richard Teng, CEO of Binance, welcomed the news of the approval of ether Spot ETFs with the community:
This is a key development that signals growing recognition and acceptance of digital assets within traditional frameworks, especially in an influential market like the U.S. 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 more widespread adoption of digital assets globally, whether for ETH, BTC or others.
As retail traders and institutional investors respond enthusiastically to regulatory developments, Binance continues to build the robust infrastructure necessary to support this growing demand from a rapidly expanding user base.