(Kitco News) – The broader crypto market experienced a slight pullback in trading on Wednesday following the hype and price gains recorded the first two days of the work week after the U.S. Securities and Exchange Commission (SEC) did a 180 and now appears to be seriously considering the approval of the first spot Ethereum (ETH) exchange-traded funds (ETFs) in the U.S.
Ether’s market cap surged by over $70.7 billion on Tuesday as a result of the bullish turn of events, marking the largest single-day market cap gain for the second-ranked crypto by market cap.
And it's not just ETF-related developments in the U.S. that have boosted crypto prices as Bitcoin and Ether ETPs have been approved for listing on the London Stock Exchange, which will be physically backed and exclusively available to professional investors.
“Bitcoin (BTC) continues its pullback in line with the broader market, although there are some outperformers like MYRO and WIF,” said analysts at Secure Digital Markets. “The price of Bitcoin appears to be headed towards the 67,000 - 69,000 range.”
“On the stock market front, U.S. stock futures dipped on Wednesday as the S&P 500 and Nasdaq are coming off record-setting sessions,” they added. “Investors are eagerly awaiting Nvidia’s latest earnings report, expected to be strong, which will be released after the bell Wednesday.”
After trading flat through the morning, markets trended lower in the afternoon following the release of the minutes from the recent Federal Open Market Committee meeting, which showed that ‘higher for longer’ is the official mantra of Fed officials.
The downturn was sparked by the revelation that “various” Fed officials mentioned a “willingness to tighten policy further should risks to inflation materialize in a way that such an action became appropriate.”
At the closing bell, the S&P, Dow, and Nasdaq all finished in the red, down 0.27%, 0.51%, and 0.18%, respectively.
Data provided by TradingView shows that Bitcoin saw choppy trading between $69,190 and $70,685 on Wednesday, a narrow range that highlights the matched strength of bulls and bears, along with the uncertainty that many traders are facing.
BTC/USD Chart by TradingView
While developments on the ETF front for both Bitcoin and Ethereum are decidedly bullish, the backdrop of rising geopolitical tensions and non-stop debt printing by central banks has resulted in a general sense of unease for global investors who are unsure of where to safely store their wealth.
At the time of writing, Bitcoin trades at $69,755, an increase of 0.24% on the 24-hour chart.
Ether ETF discussion boosts the market
Addressing the topic of the U.S. Ether ETFs, Neil Roarty, analyst at Stocklytics, noted that the top smart contract platform is “now in touching distance of $4,000 after posting a 20 percent gain in just two days.”
“The surge is linked to rumours that the SEC is set to approve Ether ETF applications – potentially as soon as this week,” he said. “Previous speculation had leaned towards an SEC rejection of the applications.”
Rotary said the approval of an Ether ETF would be important for the token as it could lead to wider adoption and a significant boost in price. “Just look at the dramatic price rise Bitcoin enjoyed when its first [U.S. spot] ETFs were approved back in January; the new flow of institutional capital has helped Bitcoin add more than 50 percent to its value since,” he said.
“But there are still some uncertainties around Ether and the wider Ethereum blockchain,” he warned. “Firstly, we’re waiting on confirmation of that SEC approval. And at the same time, the SEC is reportedly investigating whether Ether should be classed as a security rather than a commodity. If it is indeed ruled a security, the regulatory avalanche that will follow could scupper Ethereum’s plans to bring cryptocurrencies and blockchain technology to the masses.”
Kadan Stadelmann, Chief Technical Officer at Komodo, said "The SEC’s stance on ETH makes zero sense.”
“For many years, the crypto industry operated under the assumption that ETH was a commodity,” he said in a note to Kitco Crypto. “If staking could have jeopardized Ether’s classification, why didn’t the SEC make this point clear before ETH moved to PoS?”
“That’s what you get when you have a bunch of boomers and noobs try to regulate something they don’t understand,” he concluded.
Greg Taylor, Chief Investment Officer at Canada-based Purpose Investments, is bullish on the development despite the bluster from SEC Chair Gary Gensler.
"Not only do I expect the SEC to rule in favour of launching spot Ethereum ETFs – I welcome it,” he told Kitco Crypto. “Seeing our U.S. neighbours embrace this innovation means that more people will have safe and secure ways to get access to the Ethereum ecosystem.”
Looking at the situation from a higher level, Ganesh Swami, CEO and co-founder of Covalent, told Kitco Crypto that “the news around Ether ETFs signifies there is an increasing acceptance of crypto on Wall Street.”
“Institutions are starting to see how much money custodians, stablecoins and digital assets as a whole are making and want in on the action,” he added. “We saw with the approval of BTC ETFs that crypto is becoming more legitimized by big TradFi players. Ethereum will likely follow the same pattern as Bitcoin if ETH ETFs are approved. As we saw with the BTC ETF approval, the market is going to shift in a positive direction due to traders in a ‘buy the news’ moment, thus surging buying activity and sharply increasing Ether’s price.”
“Another important thing to note is that the SEC’s sentiment around ETH ETFs did a complete 180-degree turn, likely for political reasons,” Swami said. “As the 2024 election nears, those in power want to gain votes in different sectors – including the crypto industry.”
“This is also showing how much influence crypto has gained since the last election, as now candidates are vying to gain the industry’s favor,” he concluded. “Overall, this is a very positive moment for the crypto market and a time to look forward to tokens reaching new all-time highs.”
Altcoins give back some of their recent gains
It was a mixed day for the altcoin market, with more tokens in the top 200 recording losses than gains on Wednesday.
Daily cryptocurrency market performance. Source: Coin360
ConstitutionDAO (PEOPLE) was the biggest gainer, spiking 33.8% to trade at $0.0648, while DOG•GO•TO•THE•MOON (DOG) climbed 31.4%, and Livepeer (LPT) increased by 16.5%. Lido DAO saw the biggest pullback, falling 6.9%, followed by a 6.7% decrease for Nervos Network (CKB), and a loss of 5.9% for ssv.network (SSV)
The overall cryptocurrency market cap now stands at $2.59 trillion, and Bitcoin’s dominance rate is 53.2%.
