Why is the Ethereum (ETH) Price Up Today?

Ethereum (ETH) recently hit a two-month high, soaring to $3,700 with an impressive 18% surge on May 20. Fueling this rally is the buzz surrounding a possible approval of a spot Ethereum ETF. Bloomberg analyst Eric Balchunas raised the odds from 25% to 75%, pointing to political pressure on the U.S. SEC and their limited interaction with ETF applicants.

But what are the chances of an ETH ETF approval this year? Let’s dive in.

Understanding the SEC’s Stance

Balchunas shared insights that the SEC is nudging exchanges like the NYSE and Nasdaq to update their ETF filings, though no official confirmation has been released. Analyst Nate Geraci highlighted that the SEC’s decision is pending, potentially pushing VanEck’s Ethereum spot ETF beyond its May 23 deadline. This delay gives the SEC time to carefully assess the complexities and risks tied to Proof-of-Stake (PoS) cryptocurrencies.

Analysts’ Revisions and Political Influences

In line with the SEC, analysts Seyffart and Balchunas updated their predictions about the SEC’s decision on spot Ether ETFs, suggesting the SEC might approve them instead of denying them as previously expected. This shift is based on recent SEC filings, statements from SEC Chair Gary Gensler, and insider reports indicating political pressure on Democrats to support crypto. Seyffart noted the issue’s growing political nature and hinted at more related filings soon, highlighting the potentially significant impact on the crypto community if the approval happens.

Impact on Ethereum Options Market

Speculation about the Ethereum ETF has significantly impacted the upcoming $3 billion ETH options expiry. On Deribit, open interest for Ether options on May 24 is $867 million, and for May 31, it’s $3.22 billion, dwarfing open interest on CME and OKX. Deribit’s call-to-put ratio reveals a strong preference for call options, indicating bullish sentiment.

If ETH remains above $3,600 by May 24, only $440,000 in put options will be exercised, benefiting call option holders with $397 million in open interest. Similarly, for May 31, 97% of put options are priced at $3,600 or lower, becoming worthless if ETH trades above this level. The net open interest could favor call options by $1.92 billion if ETH hits $4,550, or by $1.44 billion at $4,050.

Legislative Backing for Crypto

In short, Ether’s unexpected price increase has surprised option traders, benefiting bullish strategies. These profits will likely be reinvested, keeping ETH’s price momentum positive after the expiry. Traders might use complex strategies with different expiry dates to optimize their positions, though the exact impact is hard to predict.

Furthermore, U.S. lawmakers are mulling over pro-crypto bills like the FIT21 Act and the CBDC Anti-Surveillance State Act. The lack of opposition from Democratic leaders signals strong support for the crypto industry. Stakeholders are rallying behind the FIT21 Act, pushing for its approval to foster innovation and growth in the crypto sector.

With an ETF on the table, Ethereum could be on the verge of a major breakout. We’re excited. What about you?