Why Is Ethereum Price Dumping Following ETH ETF Approval? Potential Impact on Bitcoin (BTC) and Altcoins
The price of Ethereum (ETH) has taken a nosedive, contrary to expectations of a bullish rally following the approval of several Ethereum exchange-traded fund (ETF) applications by the U.S. Securities and Exchange Commission (SEC). This unexpected price dump has left many investors puzzled and concerned about the implications for the broader cryptocurrency market.
On May 23, the SEC approved rule 19b-4 forms for eight Ethereum ETF applications submitted by prominent firms such as BlackRock, Fidelity, Grayscale, ARK Invest, VanEck, Invesco Galaxy, and Franklin Templeton. This milestone decision was seen as a significant step forward for the cryptocurrency industry, as it effectively classified Ethereum as a commodity rather than a security.
Despite the positive news, Ethereum’s price closed in the red yesterday, and the downward trend may continue today. This counterintuitive price action has raised eyebrows and sparked discussions among market analysts and industry experts. Kyle Chassé, a popular cryptocurrency analyst, offered valuable insights into the potential reasons behind the Ethereum price dump:
Delegated Authority and Political Underpinnings
According to Chassé, the SEC’s approval was granted under “delegated authority” by the Division of Trading and Markets, meaning a commissioner can challenge the decision within the next 10 days. This process suggests an attempt to avoid a formal vote due to potential political implications
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Show more +Strategic Trade-off and Timing Considerations
Chassé speculates that there may be a strategic trade-off at play, with the SEC pushing for pro-crypto measures in exchange for implementing Environmental, Social, and Governance (ESG) rules. The timing of these moves also suggests a desire to establish the ESG rules before July 1 to prevent potential challenges from a potential Trump re-election.
Similarities to the FIT Act and S-1 Approvals
Chassé draws parallels between the current situation and the recently passed FIT Act, which was viewed as “political progress” for the cryptocurrency industry. However, he believes it is unlikely that S-1 forms (registration statements for securities offerings) will be approved anytime soon, although developments are being closely watched.
Impact on Bitcoin and Altcoins
While the Ethereum price dump may seem concerning, industry experts suggest that the approval of Ethereum ETFs could have far-reaching positive implications for the broader cryptocurrency market. Based on a tweet by Mystery of Crypto, the approval will affect BTC and alts in the following ways:
Boosting Investor Confidence and Accessibility
The approval of Ethereum ETFs is seen as more impactful than a Bitcoin ETF because it confirms Ethereum’s status as a commodity, bolstering investor confidence and making the asset more accessible to institutional investors in the US market.
Lifting Bans and Attracting Institutional Investment
Additionally, classifying Ethereum as a non-security could potentially lift bans on staking and open the door for significant institutional investment in the cryptocurrency. This increased legitimacy and accessibility might attract more institutional interest in the wider crypto market, benefiting Bitcoin and other altcoins.
Potential Price Targets and Market Performance
According to analysts, Ethereum’s price could reach at least $6,000 by the end of the year, representing a 60% increase from current levels. Strong performance is expected in the latter half of the year, with a positive impact on Bitcoin and other altcoins due to the increased legitimacy and institutional interest brought about by the Ethereum ETF approvals.
Regulatory decisions like the approval of Ethereum ETFs will play a crucial role in shaping the industry’s future. While the short-term price action may seem perplexing, the long-term implications of this development could be far-reaching and transformative for the entire cryptocurrency ecosystem.
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