Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has been plagued by shifts in market sentiment, with investors still focused on the possibility of a spot ETF being approved by May 2024. ing. As probabilities fluctuate and market sentiment shifts, Daan Crypto Trades highlights key scenarios. That could impact ETH's performance in the coming months.
Ethereum ETF approved by May 2024
Daan Crypto Trades recently shared its views on the current state of Ethereum and its outlook amid speculation that a Spot ETH ETF will be approved by May 2024. Analysts noted that the ETF approval prediction market remains stagnant at about 18%. That's a significant decrease from the previous estimate of about 80%.
The analyst outlines three scenarios that could impact the future of ETH and the possibility of increasing exposure to cryptocurrencies.
Positive ETF News
In this scenario, positive developments surrounding the approval of the Spot ETH ETF make it more likely to materialize by May 2024. Paralleling the progress of Bitcoin ETFs, Daan Crypto Trades suggests that market reaction may be slow to reflect the news at first, which could present an opportunity. Strategic exposure to ETH.
Risk and reward dynamics
If the chances of ETF approval fall further, approaching just a few percentage points by May, the risk/reward balance becomes very extreme. Although this scenario is unlikely at the moment, sudden good news or faster progress could cause a significant reaction in the market.
Rejection of ETH Spot ETF
If the ETH Spot ETF faces rejection in May, Daan Crypto Trades foresees subsequent opportunities. Following a rejection, issuers such as BlackRock may resubmit their applications and offer favorable terms for allocations at attractive valuations.
Long-term outlook for ETH
Daan Crypto Trades also highlighted the enduring appeal of ETH compared to other layer 1 solutions, citing its reliability and functionality despite higher transaction costs. Additionally, analysts highlighted the growing importance of Layer 2 solutions in addressing pricing issues and improving user experience.
The analyst concluded by expressing confidence in ETH's long-term outlook and highlighting the possibility of an increase in allocation as the price declines.
However, Daan Crypto Trades acknowledges the overwhelming inflow of Bitcoin ETFs and the need for new catalysts to improve ETH's performance relative to the broader market.
