Ethereum, the second-largest cryptocurrency by market capitalization, recently experienced a price surge of 3.2%, a significant uptick that has put market watchers and investors on ‘red’ alert.
This price rally was primarily driven by the extensive liquidation of derivative traders’ positions.
ETH price surges 3.2% in 24 hours, driven by $20.4M worth of ETH shorts liquidation. Eyes are on the pending approval of US spot Ethereum ETFs, with trading expected in mid-July. Crypto market cap nears $2.5T. #Ethereum #ETFs #CryptoCap @decryptmedia
— Sharpe Signals (@SharpeSignals) July 1, 2024
The Price Rally
Ethereum, a major player in the smart contract and decentralized applications (dApps) space, witnessed a 3.2% price increase over the last day. During this upward trend, ETH reached an intraday peak of $3,514 before settling at $3,488. What’s driving this rally? The answer lies in the extensive liquidation of derivative traders’ short positions.
Understanding Derivative Liquidation
Derivatives are financial contracts that derive their value from an underlying asset—in this case, Ethereum. Short positions are derivative contracts that speculate on an asset’s price decline. When the market moves against these short positions, traders face liquidation. In contrast, long positions bet on the asset’s appreciation.
According to a derivatives analytics platform, the $20.4 million worth of Ethereum shorts liquidated far outweighs the $1.87 million in long positions liquidated during the same period. This imbalance between short and long liquidations is a clear indicator of the bullish sentiment surrounding Ethereum.
Spot Ethereum ETFs on the Horizon
Market attention isn’t solely on liquidations. Investors are eagerly awaiting the potential approval of U.S. spot Ethereum exchange-traded funds (ETFs). An ETF, or exchange-traded fund, is a type of investment fund and exchange-traded product that tracks the performance of a specific asset or group of assets.
Eric Balchunas, a Senior ETF Analyst at Bloomberg, noted that the U.S. Securities and Exchange Commission (SEC) has requested revised ETF filings to be submitted by July 8, hinting at a mid-July trading launch. Previously, projections pointed to approval by July 2, but the timeline has shifted.
Unfort think we gonna have to push back our over/under till after holiday. Sounds like SEC took extra time to get back to ppl this wk (altho again very light tweaks) and from what I hear next wk is dead bc holiday = July 8th the process resumes and soon after that they’ll launch… https://t.co/0ZQR7yiBLt
— Eric Balchunas (@EricBalchunas) June 28, 2024
SEC Chair Gary Gensler has expressed confidence in the approval process, emphasizing a summer launch. Some ETF issuers, including VanEck and Franklin Templeton, have introduced fee waivers for their spot Ethereum funds to attract institutional investors.
Widespread Crypto Gains
Ethereum isn’t the only cryptocurrency experiencing positive momentum. Recent data from Coingecko shows that the total market capitalization of cryptocurrencies has risen by 3.6% within the past day, nearing the $2.5 trillion mark. This surge is fueled by the liquidation of $81 million worth of short positions across various digital assets, offset by $17 million in long liquidations.
While the crypto market is notorious for its volatility, Ethereum’s recent surge owes much to the short liquidations, and all eyes are on the potential ETF approvals. These recent developments around Ethereum paint a promising picture.
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