Ethereum ETF Approval Hopes Surge, ETH Leads Crypto Market Rally Analysis

Ethereum ETF Approval Hopes Surge, ETH Leads Market Rally

As the U.S. Securities and Exchange Commission (SEC) enters a critical window for approving spot Ethereum ETFs, the cryptocurrency market has seen a notable rebound. Ethereum (ETH) has emerged as the leader of this rally, with its price performance and market sentiment significantly outperforming Bitcoin (BTC), sparking widespread discussion among investors about whether an "altcoin season" has arrived early.

Approval Progress: From "Impossible" to "Possible"

Earlier this year, the market widely expected the SEC to reject spot Ethereum ETF applications, citing a "lack of sufficient regulatory framework." However, a series of recent developments have significantly shifted expectations. According to sources familiar with the matter, SEC staff have held multiple technical discussions with several applicants (including BlackRock and Fidelity) on details such as custody arrangements and market surveillance sharing agreements. Additionally, SEC Chair Gary Gensler, when questioned during a congressional hearing about Ethereum's classification, avoided directly labeling it as a security, which has been interpreted as a sign of softening regulatory stance.

Currently, the final deadlines for applications from VanEck, ARK 21Shares, and others are concentrated between late May and early June. Under SEC rules, if no explicit denial is given by then, the ETFs will be automatically approved. The market widely views this window as a key moment determining whether Ethereum can replicate the success story of Bitcoin ETFs.

Market Sentiment: ETH Leads, Capital Inflows Accelerate

Buoyed by approval expectations, Ethereum's price has performed strongly in the recent rally. According to CoinGecko data, ETH has significantly outperformed Bitcoin in gains during the rebound, with its market cap dominance (ETH Dominance) recovering from early-year lows to around 18%. On-chain data also shows positive signs: the number of large transfers (over $100,000) on the Ethereum network has increased notably, and net outflows of ETH from exchanges remain positive, indicating investors are moving tokens to cold wallets for long-term holding.

The derivatives market has also reacted enthusiastically. Open interest in Ethereum futures has hit multi-month highs, while funding rates for perpetual contracts have remained positive most of the time, reflecting bullish sentiment dominance. In contrast, although Bitcoin's futures premium has also expanded, the magnitude is far less than Ethereum's, suggesting capital is shifting from Bitcoin to Ethereum.

Comparison with Bitcoin: Divergence and Correlation

After breaking above $100,000 in 2024, Bitcoin entered a phase of high-level consolidation. Despite continued net inflows into ETFs, Bitcoin's price lacks new catalysts to push past previous highs. Ethereum, on the other hand, has gained additional upward momentum from the unique narrative of ETF approval. The 30-day correlation coefficient between the two has dropped from 0.85 at the start of the year to around 0.72 recently, indicating some degree of divergence.

This divergence is not a complete decoupling. When Bitcoin experiences significant volatility, Ethereum still follows but with greater elasticity. For instance, during a recent market correction, Bitcoin fell about 5%, while Ethereum dropped only 2.5%; in the subsequent rebound, Ethereum quickly recovered and hit new highs. This characteristic of "resilience to declines and ease of gains" has further strengthened bullish expectations for Ethereum.

Potential Risks and Uncertainties

Despite optimistic market sentiment, substantial obstacles remain for Ethereum ETF approval. The SEC has yet to clarify whether Ethereum qualifies as a "commodity," and jurisdictional disputes between the Commodity Futures Trading Commission (CFTC) and the SEC are not fully resolved. Moreover, even if approved, it is questionable whether actual capital inflows into Ethereum ETFs will match those of Bitcoin ETFs. Bitcoin ETFs attracted over $10 billion in net inflows in their first month, while Ethereum has lower market depth and institutional awareness.

Another risk is the "buy the rumor, sell the news" market behavior. If the ETF is ultimately approved, short-term profit-taking could lead to a price pullback. Conversely, an unexpected rejection by the SEC could trigger a sharp decline.

Conclusion: Short-Term Sentiment, Long-Term Utility

The progress of Ethereum ETF approval is undoubtedly the core narrative for the current market. In the short term, ETH prices will be highly dependent on the SEC's decision window, with any regulatory signal potentially causing significant volatility. In the long term, Ethereum's value still hinges on the practical applications of its ecosystem—the adoption of Layer 2 scaling solutions, the tokenization of DeFi and real-world assets (RWA), and the upcoming Pectra upgrade's ability to enhance network performance. ETF approval would provide a more convenient gateway for compliant capital to support these long-term trends, but it is not the sole determinant of Ethereum's value.

For investors, while monitoring ETF news, it is crucial to also examine Ethereum's fundamental changes and avoid being swayed by short-term sentiment.

Risk Disclaimer

The above content is for reference only and does not constitute investment advice. The cryptocurrency market is highly volatile, and prices may change significantly in a short period due to regulatory policies, market sentiment, or technical risks. Investors should make independent decisions based on their own risk tolerance and a thorough understanding of the characteristics of the relevant assets. Past performance does not guarantee future returns. Invest with caution.