Crypto market's reaction to Ether ETF approvals
The Crypto Sphere Witnesses a Historic Moment
The previous week marked a significant milestone for digital currency enthusiasts, orchestrated by the United States Securities and Exchange Commission (SEC) sanctioning the inaugural batch of Ethereum-based spot exchange-traded funds (ETFs), just months following its nod to similar Bitcoin products.
Bitfinex Alpha's recent analysis depicted the market's response to this development as akin to a thrilling ride, underscored by dramatic fluctuations and sharp price shifts in both bitcoin (BTC) and ether (ETH), fueled by the mounting anticipation of the SEC's verdict.
Elevated Expectations for Regulatory Nod
The anticipation kicked off with industry experts revising the likelihood of these approvals from a mere 25% to a robust 75%, sparking notable movements in crucial indicators such as the Bitcoin Volmex Implied Volatility Index (BVIV), the Ethereum Volmex Implied Volatility Index (EVIV), and the volatility risk premiums (VRPs) associated with these digital currencies.
As a result, the BVIV and EVIV indices climbed to 64 and 85.5, respectively, while the VRPs for Bitcoin and Ethereum surged to 16 and 34 before dialing down to 10 and 30, correspondingly.
Before this turn of events favoring Ether ETFs, the digital currency arena was navigating through a phase of diminished volatility and steady equilibrium, following the Bitcoin halving event on April 19. During this calm, the BVIV and EVIV scaled down from 75 to 55 and 80 to 63, with VRPs for Bitcoin and Ethereum softening to 1.5 and 8.5.
Approaching the Federal Reserve's May 1 gathering, growing apprehensions over potential shifts in interest rates pulled the aforementioned indices and VRPs up once more, with VRPs peaking at 13 and 29.2 for Bitcoin and Ethereum. Nevertheless, the markets found equilibrium post the Fed's assembly.
Implications of the SEC's Endorsement
The authorization of Ethereum ETFs on May 23 brought a noticeable reduction in the BVIV and EVIV, decreasing to 52.5 and 69.5, in tandem with a drop in the VRPs for Bitcoin and Ethereum to 7 and 18, respectively.
This pivotal decision triggered a downward trajectory in the values of BTC and ETH, which had previously ascended to $71,000 and $3,900, buoyed by speculative trading in the perpetual futures market. The ensuing phase saw investors cashing in on their gains, exerting further pressure on the prices of these leading cryptocurrencies.
As of the current update, BTC and ETH are trading at $68,000 and $3,871, after experiencing a 1% depreciation over the last day.
