Last week, the market sentiment toward ETH underwent a dramatic shift following the U.S. Securities and Exchange Commission's (SEC) unexpected approval of spot ETH ETF proposals.
The SEC greenlit 19b-4 applications from the New York Stock Exchange (NYSE), Chicago Board Options Exchange (Cboe), and Nasdaq. S-1 forms for key issuers like BlackRock, Fidelity, and VanEck are under review, with ETH ETF trading set to launch only after final approval.
Kaiko Analysis: Implications of Soaring Implied Volatility
According to Kaiko's institutional research, ETH's near-term implied volatility surged from below 60% on May 20 to nearly 90% by May 22 before retreating. Notably, short-term volatility exceeded long-term metrics—a phenomenon known as an inverted volatility structure—typically signaling market stress.
Derivatives Market Reactions
ETH's sharp sentiment reversal also manifested in derivatives:
- Perpetual futures funding rates rocketed from 1-year lows to multi-month highs within 72 hours
- Open interest in ETH futures hit a record $11 billion, reflecting massive capital inflows
- The ETH/BTC ratio rose but remains below February peaks
Broad-Based Spot Market Rally
Since May 21, robust net buying emerged across U.S. and offshore spot markets, reversing prior offshore exchange net sell-offs.
Grayscale's ETHE: A Short-Term Concern
ETH ETF launches may trigger sell pressure as Grayscale's ETHE faces potential outflows. This fund traded at 6%–26% discounts over three months and holds $11+ billion in assets—making it the largest ETH investment vehicle.
BTC ETF Precedent: ETH Sell Pressure Could Equal 30% of Coinbase Daily Volume
👉 How will ETH ETFs reshape crypto markets?
Bitcoin ETFs saw GBTC outflows totaling $6.5 billion (23% of initial AUM) in their first month. Similar ETHE outflows could mean:
- $110 million average daily outflows
- Equivalent to 30% of Coinbase's ETH trading volume
However, GBTC outflows were later offset by other BTC ETF inflows—ETHE's net impact remains uncertain.
Market Depth as a Critical Factor
ETH's centralized exchange market depth stands at $226 million—42% below pre-FTX averages. Only 40% of depth now concentrates on U.S. exchanges versus 50% in early 2023.
FAQ: ETH Market Outlook
Q: How long until ETH ETFs begin trading?
A: Trading starts after final S-1 approvals—estimates range from weeks to months.
Q: Could ETH outperform BTC post-ETF?
A: Historical patterns suggest possible short-term ETH rallies, but long-term dominance depends on adoption metrics.
Q: What's the biggest risk for ETH prices?
A: ETHE outflows and thin market depth may amplify volatility during ETF launches.
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Risk Disclosure
Cryptocurrency investments carry high risk, with prices subject to extreme volatility. Capital loss is possible—assess risks cautiously.
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