Last night’s (23 MAY) market did not disappoint expectations. It was lively from 9 PM until the early hours of the morning. Before the much-anticipated ETH spot ETF announcement, the price of Ethereum surged all the way up to challenge the high of 4000 points but quickly gave back all of the previous day’s gains, dropping to around $3720. Although the price quickly recovered most of the lost ground, the latest data released by the US at 21:45 (UTC+8) delivered another blow to the risk market. The data showed that the US May S&P Global Composite PMI Index recorded 54.4, far exceeding the expected 51.1 and marking a new high in the past two years. The manufacturing and services PMI also exceeded expectations. After the data release, US bond yields surged in the short term, with the ten-year yield reaching 4.4980% at one point, and the two-year yield rising above 4.9% again. Traders also postponed the Fed’s first rate cut to December, with the futures market reducing the full-year rate cut bet to 34 basis points. All three major indices closed lower, with Nvidia bucking the trend and rising 9.3% to a new historical high, standing out from the rest.

Source: SignalPlus, Economic Calendar

Source: Investing, US May S&P Global Composite PMI Index far exceeded expectations, reaching a two-year high; ten-year Treasury yield

Subsequently, at 4 AM, the main event of the night occurred when the US SEC officially announced the approval of the ETH Spot ETF. However, the price of ETH plunged to around $3500 after the news release, reflecting the traditional market adage “Buy the rumor, sell the news.” Over the past week, ETH had already risen by 29%. Cryptocurrency commentator Zach Rynes remarked on last night’s move, saying, “everyone who wanted to buy the approval already did.” Delving into the reasons why the price did not rise following the positive news, a crucial point is that this so-called “approval” was merely the approval of 19b-4 applications submitted by eight institutions (BlackRock, Fidelity, Grayscale, Bitwise, VanEck, Ark, Invesco Galaxy, Franklin Templeton). Actual trading cannot commence until Form S-1 is also approved, which could take weeks or even months. Furthermore, the approval came from the SEC’s Trading & Markets division rather than SEC Chairman Gary Gensler and the other four commissioners. Bloomberg ETF analyst James Seyffart commented that making decisions through delegated authority is normal, and it would be unreasonable for the SEC to require an “official vote” on every decision and document. Regardless of how one interprets this detail, the crypto community has responded positively to this approval, calling it a “historic move.”

Source: TradingView

In terms of options, after the ETF announcement, the overall implied volatility levels for BTC and ETH quickly declined, with the curve steepening. The average IV level for ETH returned to around 63%. On the trading front, ETH’s large Top Trade showed a clear direction. We observed 20,000 short puts for ETH expiring in late May and June, as well as a combined total of approximately 12,000 long call spreads for ETH expiring in late June and July. As mentioned earlier, the approval of the 19b-4 applications is just the first victory. The approval of the S-1 application for the ETH spot ETF will still take several weeks or even months. Only when traditional finance (TradFi) funds truly flow into the cryptocurrency market will there be a more substantial impetus for the price to rise.

Source: Deribit （As of 24 MAY 8:00 UTC）

Source: SignalPlus

Data Source: Deribit, Overall Distribution of ETH Trading

Data Source: Deribit, Overall Distribution of BTC Trading

Source: Deribit Block Trade

Source: Deribit Block Trade