The Big SEC Surprise

Approval Relief. Ethereum’s spot ETF was shockingly approved and the crypto market landscape will never be the same! What happened this week in markets?

With the SEC’s first final decision for an active spot ETH ETF application scheduled to occur on Thursday, market participants came into the week expecting significant volatility… 

Although consensus overwhelmingly held that spot ETH ETFs would be denied come this deadline, rumors that the SEC was unexpectedly communicating with issuers began circulating on Monday.

The prior absence of any meaningful communication had pushed market participants to prepare for denial, but the sudden reversal caused Bloomberg’s ETF analysts to increase their odds of approval threefold to 75%!

Renewed confidence in renewal sent traders scrambling to long ETH, causing the ETH/BTC ratio to surge back above the key level at 0.05 and resulting in outsized Ether strength throughout the week (or at least until ETF approval).

Many crypto market participants had long clung to beliefs that BTC was a special type of digital asset and would be the only one to receive regulatory clarity as a non-security, however, indications that the ETH ETF could be approved blew a hole in this narrative and confirmed that BTC will need to compete among other digital assets for TradFi’s attention.

The loss in BTC’s narrative strength can be clearly observed in the charts; Bitcoin Dominance had its worst week since the arrival of spot BTC ETFs enabled redemptions for the Grayscale Bitcoin Trust (GBTC) and led to sell pressure that drove token price under.

Unfortunately, the approval of the ETH ETF marked peak strength for alts. The ETH/BTC wicked as low as 7% off its Thursday approval highs and Bitcoin was one of the market’s lone gainers on Friday as traders rotated out of assets that outperformed leading up to Ether’s ETF approval.

While this week’s headlines proclaimed “ETH ETFs Approved,” there remains a minute possibility the SEC could walk back its green light, as the approvals came per “delegated authority” by SEC staff, which a commissioner can challenge within 10 days. Nevertheless, Bloomberg Senior ETF Analyst Eric Balchunas has dismissed these concerns outright. 

Alternatively, traders may be wary of the potential sell pressure that can be expected from the $10B AUM Grayscale Ethereum Trust (ETHE); its conversion into a spot ETF enables redemptions and allows the instrument to trade at par for the first time in three years.

The core doctrine of laser-eyed BTC maximalists may have experienced a crushing fundamental defeat now that it appears that any digital asset – no matter how it originated – can become a non-security, but leaders of this cult are holding steadfast in their beliefs that there is still no second best.