If the Bitcoin ETF is approved, could it drive Ethereum up by 75%?
The approval of Bitcoin ETFs may lead to an increase in traditional financial investors' investments in cryptocurrencies.Written by: ASHU GOLA
Compiled by: Deep Tide TechFlow
January 10 is the deadline for the U.S. Securities and Exchange Commission's decision on the Bitcoin ETF, and the market is optimistic about the approval of the Bitcoin ETF. This key event could have widespread implications for the crypto market, including Ethereum, the second-largest cryptocurrency by market capitalization.
If the Bitcoin ETF is approved, Ethereum's price could see an increase of up to 75% in the coming months.
Ethereum ETF
The approval of the Bitcoin ETF could set a regulatory precedent, paving the way for other cryptocurrency-based ETFs, as the approval of the Bitcoin ETF would help establish a framework applicable to other cryptocurrencies, including Ethereum.
In December 2023, the SEC postponed its decision on several Ethereum ETF applications in the U.S. until May 2024, including the Hashdex Nasdaq Ethereum ETF, Grayscale Ethereum Futures ETF, VanEck Ethereum Spot ETF, and the Ethereum Spot ETF submitted by Cathie Wood's ARK Invest and 21Shares.
The delay in approval is part of the SEC's process, which requires time to gather public opinion before deciding whether these ETFs should be listed. However, they also appear during the commission's investigation into classifying some proof-of-stake (PoS) cryptocurrencies as securities.
Interestingly, Ethereum has not been classified as a security in any of the SEC's recent lawsuits against cryptocurrency exchanges. The commission has also not questioned Ethereum's classification through the Commodity Futures Trading Commission (CFTC) ETF registration process.
This increases the likelihood of the spot Ethereum ETF being approved in the U.S. by May 2024, which could boost ETH prices.
Ethereum-Bitcoin Correlation
If the approval of the Bitcoin ETF does not turn into a "sell-the-news" event (i.e., a bearish event), Ethereum's price is expected to rise significantly due to its correlation with BTC prices in recent years.
Fundamentally, the approval of the Bitcoin ETF could lead to an increase in traditional financial investors' interest in cryptocurrency investments. In turn, this could cause ETH prices to rise as market expectations for increased demand grow.
Conversely, a delay or rejection of the Bitcoin ETF could lead to a short-term pullback. A recent survey by Bitwise found that only 39% of U.S. financial advisors believe that a Bitcoin ETF will be approved this year.
Technical Indicators
From a candlestick technical indicator perspective, ETH's price is currently approaching the resistance trend line of its ascending wedge pattern. A delay or rejection of the Bitcoin ETF could lead to a price pullback to around $1865 near the lower trend line of the wedge in February.
The $1865 level coincides with ETH's 0.236 Fibonacci line and its 50-week exponential moving average (the red wave line in the above chart).
On the other hand, the approval of the ETF could completely invalidate Ethereum's ascending wedge, instead supporting an ascending triangle reversal pattern, as shown below.
If so, by March, Ethereum could rise to the upward target of the triangle close to $3870, a 75% increase from the current price level, coinciding with the 0.786 Fibonacci line.
