Ethereum’s native token Ethereum (ETH) saw marginal gains on October 2 as institutional investors anticipated an influx after traditional stock market exchanges launched exchange-traded funds (ETFs) linked to Ethereum futures . The adoption of the Ethereum network by traditional financial institutions to enable tokenized real-world assets (RWA) has also had a positive impact on investor sentiment.
Ethereum gained 1.1% between October 1 and 2, bringing its price close to resistance at $1,700 for the first time in a month.
Multiple Ethereum Futures ETF Instruments Change the Narrative
Eric Balhunas, senior ETF analyst at Bloomberg, posted on the X social network (formerly Twitter), expressing disappointment with the initial trading performance of the Ethereum futures instruments launched on October 2 by VanEck, ProShares, Valkyrie and Bitwise.
Volume for the Ethereum Futures ETF as a whole is quite impressive at just under $2 million, which is about normal for a new ETF, but not as high as $small ($200 million in the first 15 minutes) It’s low. VanEck and ProShares compete fiercely on a single eth channel. pic.twitter.com/F9AHtrVcVf
— Eric Balchunas (@EricBalchunas) October 2, 2023
Data shows that 64% of trading volume in these futures instruments comes from ETFs offering Bitcoin (BTC) and Ethereum futures positions. VanEck’s products are listed on the Chicago Board Options Exchange (CBOE), while Proshares and Bitwise choose to list on the New York Stock Exchange.
Despite the initial disappointment, Ethereum enthusiasts are pleased with the ETFs because they create a fully regulated investment vehicle for institutional investors who previously had no access to the cryptocurrency market.
UBS selects Ethereum network for its tokenization project
On October 2, Swiss bank UBS announced the launch of an instant pilot for tokenized real-world assets (RWA) on the Ethereum blockchain. The move, led by Singapore’s central bank, involves UBS Asset Management issuing tokens representing shares of a money market fund.
This incident further verified investors’ confidence in the processing capabilities and security of smart contracts on the Ethereum network, thus driving the positive momentum in Ethereum prices. Ethereum’s growing use cases justify the higher valuation of its native token, as it is crucial for conducting transactions on the network.
Grayscale Requests to Convert Its Ethereum Trust (ETHE)
Crypto asset manager Grayscale has submitted an application to the U.S. Securities and Exchange Commission (SEC), seeking approval to convert its Ethereum Trust into a spot Ethereum ETF. Grayscale’s Ethereum Trust (ETHE) originally launched in March 2019 and currently has a net asset value of $4.9 billion, equivalent to holding 2,981,563 ETH in its structure.
Investment trusts such as ETHE are legally organized companies and are classified as “closed-end funds”. As a result, the supply of stocks is limited and their prices depend heavily on supply and demand dynamics. Therefore, the creation of ETHE shares is not easy to achieve and there is no active redemption plan. This situation often results in a large price difference compared to the underlying value represented by the portion of ETH held by the trust.
Short liquidation pushes Ethereum price to $1,755
On October 1, the price of Ethereum increased while short liquidations in Ethereum futures contracts totaled $23 million, while only $2.4 million worth of long positions were liquidated in the same 12 hours.
Short sellers were forced to buy futures contracts at any price to cover their positions, causing a spike to $1,755 on October 1, the highest level in 45 days.
Notably, the subsequent pullback to $1,680 on October 2 triggered the liquidation of long positions worth $10.8 million, exacerbating market volatility.
Ultimately, Ethereum bulls have reason to feel more optimistic, as new ways to invest through traditional stock market brokers have emerged and the potential for tokenization of real-world assets on the Ethereum blockchain is growing.
This article does not contain investment advice or recommendations. Every investment and trading activity involves risks, and readers should do their own research when making decisions.
This article is for general information purposes only and is not intended to be, and should not be construed as, legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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