Ethereum’s native token, Ether (ETH) saw marginal gains on Oct. 2, driven by the anticipation of institutional investor inflow following the launch of an exchange-traded fund (ETF) linked to Ether futures on traditional stock market exchanges. The adoption of the Ethereum network by traditional financial institutions for real-world tokenized assets (RWA) has also had a positive impact on investor sentiment.
Between Oct. 1 and Oct. 2, Ether recorded gains of 1.1%, bringing its price close to the $1,700 resistance level for the first time in a month.
Multiple Ethereum futures ETF instruments shift the narrative
Eric Balhunas, a senior ETF analyst at Bloomberg, expressed disappointment with the initial trading performance of Ethereum futures instruments listed on Oct. 2 by VanEck, ProShares, Valkyrie and Bitwise in a post on the X social network (formerly Twitter).
Pretty meh volume for the Ether Futures ETFs as a group, a little under $2m, about normal for a new ETF but vs $BITO (which did $200m in first 15min) it is low. Tight race bt VanEck and ProShares in the single eth lane. pic.twitter.com/F9AHtrVcVf
— Eric Balchunas (@EricBalchunas) October 2, 2023
The data indicates that 64% of the trading volume in these futures instruments comes from ETFs that provide exposure to Bitcoin (BTC) and Ether futures. VanEck’s products are listed on the Chicago Board Options Exchange (CBOE), while Proshares and Bitwise have chosen the New York Stock Exchange for their listings.
Despite the initial disappointment, Ethereum enthusiasts are pleased with the ETFs as they have created a fully regulated investment vehicle for institutional investors who previously lacked access to cryptocurrency markets.
UBS picks the Ethereum network for its tokenization project
On Oct. 2, Swiss bank UBS announced the launch of a live pilot for tokenized real-world assets (RWA) on the Ethereum blockchain. This initiative, led by Singapore’s central bank, involves UBS Asset Management issuing tokens representing shares of a money market fund.
This event further validates investor confidence in the Ethereum network’s smart contract processing capabilities and security, which has contributed to the positive momentum in Ether’s price. The growing use cases for Ethereum justify a higher valuation for its native token, as it is essential for conducting transactions on the network.
Grayscale requests conversion of its Ethereum Trust (ETHE)
Crypto asset manager Grayscale has submitted an application to the U.S. Securities and Exchange Commission (SEC) seeking approval to transform its Ethereum Trust into a spot Ethereum ETF. Grayscale’s Ethereum Trust (ETHE) was initially launched in March 2019 and currently boasts a net asset value of $4.9 billion, equivalent to 2,981,563 ETH held within its structure.
Investment trusts, such as ETHE, are legally organized as companies and are categorized as “closed-end funds.” Consequently, the availability of shares is restricted, with their price largely determined by supply and demand dynamics. As a result, the creation of ETHE shares is not easily achievable, and there is no active redemption program in place. This situation often leads to significant price disparities compared to the underlying value represented by the ETH fractions held by the trust.
Short liquidations push Ether’s price to $1,755
Ethereum’s price increase on Oct. 1 coincided with short liquidations totaling $23 million in Ether futures contracts, while only $2.4 million worth of long positions were liquidated during the same 12-hour period.
Short sellers were forced to close their positions by purchasing futures contracts at any price, leading to a momentary spike to $1,755 on Oct. 1, marking the highest level in 45 days.
It’s important to note that the subsequent correction to $1,680 on Oct. 2 triggered the liquidation of $10.8 million worth of long positions, contributing to the market volatility.
Ultimately, Ethereum bulls have reasons to feel more optimistic, as a new avenue for investment through traditional stock market brokers has emerged, along with the increasing potential for real-world asset tokenization on the Ethereum blockchain.
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