Ethereum Soars on Spot ETF Approval Rumor
21 May, 2024 ● Kripto novosti
Ether's value jumped by more than 18% following comments from Eric Balchunas, a senior Bloomberg analyst, who increased the likelihood of an Ethereum exchange-traded fund (ETF) being approved from 25% to 75%.
Balchunas pointed out that the United States Securities and Exchange Commission (SEC) likely succumbed to political pressure, as indicated by their minimal interaction with ETF applicants in the past.
Balchunas also remarked that the SEC seems to be requesting updates to filings from major exchanges like the NYSE and Nasdaq, though no formal announcement has been made by the regulatory body.
Nate Geraci, co-founder of the ETF Institute and president of the ETF Store, commented that a definitive decision on the individual fund's registration requirements (S-1s) is yet to be made.
Geraci elaborated that the SEC might sanction the rule changes for exchanges (19b-4s) independently of the fund’s registration (S-1), potentially postponing it past the May 23 deadline set for VanEck’s request for an Ethereum spot ETF.
This delay would provide the SEC extra time to scrutinize and approve these documents, given the intricacies and potential risks tied to proof-of-stake (PoS) cryptocurrency frameworks.
The upcoming resolution concerning spot Ethereum ETFs has markedly increased the focus on the expirations of weekly and monthly ETH options.
At Deribit, the premier derivatives exchange, the open interest for Ether options on May 24 stands at $867 million, and an impressive $3.22 billion for May 31.
In contrast, the CME lists its monthly ETH options open interest at $259 million, with OKX recording $229 million.
At Deribit, the ratio of call-to-put options strongly leans towards the call (buy) options, suggesting that traders are favoring buying over selling.
If Ether maintains a price over $3,600 by 8:00 am UTC on May 24, only $440,000 worth of the put options will be activated at expiry.
Effectively, the right to sell ETH at $3,400 or $3,500 becomes moot if its trading price is higher than these figures.
Also, if Ether stays above $3,600, the owners of call options at or below this price will exercise their right to capture the price differential, resulting in a significant $397 million in open interest skewed towards call options at the time of the weekly expiry.
For the monthly expiry on May 31, the stakes escalate, as 97% of the put options, priced at or below $3,600, will become void if Ether’s value surpasses this mark.
While the actual outcome is expected to fall short of the staggering $3.22 billion open interest, it will predominantly benefit the call options.
For example, if Ether hits $4,550 on May 31, the net open interest will be $1.92 billion in favor of the call options. Even at a price of $4,050, the advantage still tilts $1.44 billion towards call options.
It's crucial to note that selling a put option can give a trader positive exposure to Ether once it exceeds a certain price.
Similarly, a call option seller gains if ETH’s price drops, allowing for more complex strategies involving different expiry dates.
However, calculating the exact impact of these strategies isn't straightforward.
Ultimately, the surprising 18% rise in Ether caught many options traders off-guard, potentially leading to significant gains for those with bullish positions.
These profits are likely to be reinvested to sustain positive momentum, which could positively influence Ether's price post-expiry.
Sources:
https://x.com/EricBalchunas/status/1792636523050906102
