Crypto analytics firm Kaiko stated that speculative excitement towards Ethereum (ETH) is still far from the lowest levels seen in 2022.
March Expectations for ETH
In a new report, Kaiko claimed that Bitcoin benefited from the excitement over the approval of BTC exchange-traded funds (ETFs) in the US, but speculation regarding an Ethereum ETF has not yet started. The US Securities and Exchange Commission (SEC) recently postponed its decision on the banking giant Fidelity’s spot market Ethereum ETF application to March. The company stated the following:
Although there is some excitement about ETH ETF applications, data shows aggressive speculation has not yet started. ETH trading volume increased, but derivative markets lacked signs of investors positioning for a rally. ETH futures ETFs have also been experiencing a slow transaction process for several months. The correlation between ETH and BTC has receded to the lowest levels in several years as each token matures and develops its own narrative. While ETFs have been one of the most catalytic narratives in BTC’s history, it is still unknown whether ETH can replicate this. However, there are many narratives ETH can rely on. If ETFs are not sparking excitement, perhaps the success of new Layer-2s or EigenLayer and the reinvestment could trigger it.
ETH Futures
Kaiko also says that derivative data indicates that recent ETH movements have been largely driven by spot markets rather than perpetual futures, and the firm states that this provides evidence that investors are not using leverage in anticipation of an ETH ETF, saying:
September and October marked a low point in the futures markets. Total open positions (in USD) fell more than 20% from summer levels. There was very little price movement at the time, and funding rates were neutral… After the BTC approval, funding rates returned to neutral levels while open positions rose ahead of the price. This is an indication of increasing open positions. However, we did not see a significant increase in open positions characteristic of a bull market.