Finance

Ethereum Skyrockets to a 6-Month High: Is BlackRock’s Spot ETF the Catalyst, and What’s Happening with Retail Demand?

Ethereum’s Surprising Rally Sparked By BlackRock’s Ethereum Trust Registration

Ethereum (ETH), the world’s second-largest cryptocurrency by market cap, experienced a stunning 8% rally on November 9, 2023. Ethereum soared past the $2,000 mark and reached its highest price level in six months. This price surge was prompted by news that BlackRock, a leading financial institutions with $9 trillion in managed assets, had registered the iShares Ethereum Trust in Delaware.

Expectations Following BlackRock’s Move

This development led to wild speculations and high expectations that BlackRock could potentially file for an Ether spot exchange-traded fund (ETF). This speculation was triggered by BlackRock’s similar approach with their iShares Bitcoin Trust, which was registered in Delaware about a week before the filing of their initial Bitcoin ETF application in June 2023. Despite no official statement from BlackRock, investors seem to have jumped the gun due to BlackRock’s massive influencers in the financial world placing those betting against ETH’s success in a difficult spot.

Derivatives and the Future of ETH

To comprehend the positioning of professional traders after this surprising rally, the ETH derivatives metrics were analyzed. Under typical circumstances, Ether monthly futures are traded at a 5%–10% yearly premium in relation to spot markets – an indication that sellers demand extra funds for postponing the settlement.

On November 9, Ether’s futures premium leaped to 9.5%, marking the highest level over the past year. Analysts observed an end to the two-month bearish period and declining demand for leveraged long positions, signaling a significant shift in the market.

Consistency in Broader Market Structure?

Broadly analyzing the entire cryptocurrency market structure and especially the retail indicators, there seems to be a mismatch between increasing optimism and the demand for leverage by using Ether derivatives.

There is little doubt that Ether bulls got the upper hand, regardless of the spot ETF narrative, as ETH rallied 24%, even before the BlackRock news. This price trend reflects an increased demand for the Ethereum network, as seen in the top decentralized applications (DApps) 30-day volumes. However, the Google searches for “Buy Ethereum”, “Buy ETH”, and “Buy Bitcoin” have remained stagnant over the past week.

Retail Indicators and Future Demand

One may argue that retail traders typically follow bull runs, usually joining the cycle a few days or weeks after significant price points and 6-month highs have been attained. Nonetheless, a declining trend in demand for cryptocurrencies can be noted, based on the stablecoin premium metric, which gauges Chinese crypto retail trader activity.

In summary, Ethereum’s rally above $2,000 seems to be fueled more by derivatives markets and expectations of a spot ETF approval, rather than clear evidence of growing retail demand. The lack of such demand is not necessarily an indicator of an imminent correction. However, the excitement around BlackRock’s Ethereum Trust registry, combined with the increasing long positions in ETH derivatives, raise concerns that put the $2,000 support level to the test.

Disclaimer

This article is crafted for informational purposes only and should not serve as, or be interpreted as, legal or investment advice. The views, thoughts, and opinions expressed herein belong to the author only and do not necessarily reflect or represent the views and opinions of any establishment.

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