Bitcoin ETF approval could drive Ethereum up 75%?
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Bitcoin ETF approval could drive Ethereum up 75%?
The approval of Bitcoin ETFs could lead to increased investment in cryptocurrencies from traditional finance investors.
Navigating Web3 tides with focused insightsAuthor: ASHU GOLA
Translation: TechFlow
January 10 marks the U.S. Securities and Exchange Commission's (SEC) deadline for making a decision on bitcoin ETFs, and market sentiment remains optimistic about approval. This pivotal event could have broad implications for the crypto market, including Ethereum, the second-largest cryptocurrency by market capitalization.
If a bitcoin ETF is approved, Ethereum’s price could surge as much as 75% in the coming months.
Ethereum ETF
Approval of a bitcoin ETF could set a regulatory precedent, paving the way for other crypto-based ETFs, as such approval would help establish a regulatory framework applicable to other cryptocurrencies, including Ethereum.
In December 2023, the SEC postponed decisions on several U.S. Ethereum ETF applications until May 2024, including the Hashdex Nasdaq Ethereum ETF, Grayscale Ethereum Futures ETF, VanEck Ethereum Spot ETF, and the spot Ethereum ETF jointly filed by Cathie Wood’s ARK Invest and 21Shares.
The delay is part of the SEC’s standard process, allowing time to gather public comments before deciding whether these ETFs should be listed. However, these delays also coincide with the commission’s ongoing efforts to classify certain proof-of-stake (PoS) cryptocurrencies as securities.
Interestingly, Ethereum has not been classified as a security in any of the SEC’s recent lawsuits against cryptocurrency exchanges. The commission has also refrained from challenging Ethereum’s classification through the Commodity Futures Trading Commission’s (CFTC) ETF registration process.
This increases the likelihood that a spot Ethereum ETF could be approved in the U.S. by May 2024, which may provide a significant boost to ETH’s price.
Ethereum-Bitcoin Correlation
If bitcoin ETF approval does not turn into a "sell-the-news" event, Ethereum’s price could see substantial gains due to its strong historical price correlation with BTC.
From a fundamental standpoint, approval of a bitcoin ETF could lead to increased institutional investment in cryptocurrencies via traditional finance channels. In turn, this could drive up ETH prices amid rising demand expectations.
Conversely, a delay or rejection of the bitcoin ETF could trigger a short-term market correction. A recent Bitwise survey found that only 39% of U.S. financial advisors believe a bitcoin ETF will be approved this year.
Technical Indicators
From a technical perspective, ETH’s price has recently approached the resistance trendline of an ascending wedge pattern. A delay or rejection of the bitcoin ETF could cause the price to retrace in February toward the lower boundary of the wedge near $1,865.
The $1,865 level aligns with ETH’s 0.236 Fibonacci retracement level and its 50-week exponential moving average (the red wavy line in the chart above).
On the other hand, approval of the ETF could invalidate the ascending wedge entirely, potentially triggering an ascending triangle reversal pattern, as illustrated below.
If so, Ethereum could rise to the upside target of the triangle near $3,870 by March, representing a 75% increase from current levels and coinciding with the 0.786 Fibonacci level.
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