The ETH/BTC pair has touched its yearly lows, but the appearance of ETF based on futures on the second-largest cryptocurrency could reverse this trend. The conclusion comes from experts at K33 Research.
Analysts noted that the downtrend formed in September 2022 during The Merge. Since then, relative to Bitcoin, Ethereum’s price has fallen from about ~0.085 to 0.06.
“A sustained decline over the year has been linked to reduced activity in the DeFi and NFT segments,” — the report states.
Kaiko analysts noted that Ethereum showed weakness not only against Bitcoin but across the altcoin space. Since the start of the year this gap has only widened. The trend was accompanied by a decline in trading volume of the second-largest cryptocurrency.
?#ETH trade volumes have been lackluster over the past year. As markets began rallying in January, #altcoins began to outpace ETH and the gap has continued to grow ever since. pic.twitter.com/0VGF089Px1
— Kaiko (@KaikoData) September 26, 2023
Analysts at Deutsche Digital Assets in an interview with The Block explained the current weakness of Ethereum relative to Bitcoin as renewed net issuance at an annual rate of 0.22% amid a reduction in the burning of a portion of fees. The latter is typical of periods of low network activity.
Bearish sentiment toward Ethereum is also evident in the derivatives market. According to K33 Research, on the back of a 60% rise in open interest since August, backwardation in the second-largest cryptocurrency is more pronounced than in digital gold.
Analysts see this as evidence of market participants’ skepticism about approving a futures Ethereum ETF and/or inflows into this instrument. In their view, the market is mistaken about the prospects for SEC. They are convinced that this could happen in mid-October and become a catalyst for Ethereum purchases.
Earlier, Bloomberg senior market analyst Eric Balchunas assessed a 90% probability of such a scenario playing out in early October.
“It looks like the SEC could release several Ethereum futures ETFs next week,” he said.
Looking like the SEC is gonna let a bunch #Ethereum futures ETFs go next week potentially https://t.co/YoBD1d1ay8
— James Seyffart (@JSeyff) September 28, 2023
The Commission is currently reviewing 15 proposals to launch a futures-based ETF on the second-largest cryptocurrency.
In September, Grayscale Investments joined the race.
Earlier this week, the SEC delayed a decision on requests from 21Shares and VanEck to launch a spot Ethereum ETF.