A Potential Ethereum ETF

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A month hasn’t passed since the approval of all 11 spot Bitcoin ETFs, and an Ethereum ETF may be approved. On January 24, the U.S. markets regulator delayed its decision regarding finance industry leader BlackRock's application to convert its Ethereum trust product into a spot ETF.

The following day, the SEC delayed again its decision on a proposal by a crypto asset manager from Grayscale Investments, aiming to introduce a similar product. A spot crypto ETF reflects the market value of the underlying digital asset, providing investors access to the token's performance without the need to directly purchase the currency.

Earlier in January 2024, the SEC approved 11 spot bitcoin ETFs, marking a huge milestone for the crypto space, which had been seeking regulatory approval for similar products for over a decade.

The excitement following the approval and optimistic anticipation of increased integration between traditional finance and the crypto sector through the introduction of ETFs has resulted in widespread growth across crypto assets and related industry stocks. Ethereum, the second-largest cryptocurrency by market capitalization, has increased by around 19%. 

The green box shows where Bitcoin ETF discussions were happening, and Ethereum pumped up by 21% in just 4 days, even though it wasn't the main topic. Ethereum rose more on the day before spot Bitcoin ETFs got approved than on the approval day itself. After January 11th, Ethereum went sideways and then dipped. But around January 26th, when Ethereum ETF talks started, Ethereum began rising again. The Simple Moving Average is about to cross the Smoothing Line in the blue box, this usually signals a bullish trend.

With the possibility of an Ethereum ETF rising, let’s check out how it might affect the top L2 tokens built on Ethereum.

Arbitrum (ARB)

Arbitrum is a leading Layer 2 solution on Ethereum and could be heavily impacted by the potential approval of an Ethereum ETF. If the ETF gets approved, more people will look into the Ethereum ecosystem so Arbitrum will get more attention as it’s a leading L2 solution. This increased attention may result in greater adoption of Arbitrum by various projects looking for performance improvements through rollups, this increased usage would lead to a potential rise in the price of Arbitrum.

Arbitrum also rose during the Bitcoin ETF discussions (highlighted in the green box), with an increase in ARB by 60% in just 4 days. Similar to Ethereum, ARB saw a greater increase in price on the day before the approval of spot Bitcoin ETFs than on the approval day itself. But it dipped as it crossed the overbought line on the RSI indicator, and has been declining since the day after the Bitcoin ETF approval. 

On the day US market regulators delayed Blackrock's application for an Ethereum spot ETF, ARB began rising again. While it had small dips along the way, ARB's price has generally been on an upward trend since then. Like Ethereum, the Moving Average is about to cross with the Smoothing Line in the blue box, suggesting a bullish trend.

Pendle (PENDLE)

Pendle is a platform allowing the tokenization of future yield streams, positioned to benefit from an Ethereum ETF approval. An increase in attention to DeFi protocols following ETF approval could drive more demand for Pendle tokens which will result in higher adoption and liquidity, potentially boosting their value within the DeFi ecosystem.

The PENDLE chart is looking very bullish, gradually rising since 18 August 2023. But it was moving up slowly until 10 January 2024, the day before all Bitcoin ETFs were approved when it pumped by 30%. Then on the day of the Bitcoin ETF approval, PENDLE had an 18% increase. It corrected itself for a few days afterward as it crossed the overbought line on the RSI indicator. Despite these corrections, PENDLE's chart continues to rise even higher, with highs followed by corrections and then reaching even higher peaks.

Manta Network (MANTA)

Manta Network is a web3 ecosystem designed for creating dApps using Solidity, offering faster transaction speeds than L1 solutions and lower gas costs than L2 solutions. If the Ethereum ETF is approved, it could increase the adoption of dApps on the Manta Network, because of more exposure to the Ethereum ecosystem. This exposure could potentially lead to a rise in the price of Manta over time.

Manta is still new, so the RSI indicator and Moving Average don't quite work yet. It looks like it's been on the rise since it launched, but we can't say for sure how long that'll last. Investing in something like this is risky since it could go either way.

Lido Staked ETH (stETH)

StETH is a variant of ETH that is staked on Lido, a decentralized Ethereum protocol. So the approval of an Ethereum ETF could heavily affect StETH and Lido. The attention and investment from ETF may increase demand for staking through Lido, potentially boosting StETH's value. With more investors seeking exposure to Ethereum's proof-of-stake process through Lido, the liquidity and utility of stETH tokens in DeFi could rise further.

Lido's price rose during the Bitcoin ETF discussions like many other cryptocurrencies (highlighted in the green box), by a 31% increase in just 3 days. But on the day of the Bitcoin ETF's approval, its price declined. Since then, Lido has been on a downward trend until January 23rd. On January 24th an uptrend began, which was the day BlackRock's application was delayed. The Simple Moving Average is about to cross the Smoothing Line,  this usually suggests a bullish trend.

The potential launch of an Ethereum ETF is another special milestone for the crypto industry, and it’ll likely affect Layer 2 tokens. The market's reaction to this development is worth considering as the industry evolves.

Most of the token charts discussed in the article suggest a positive market impression. Here are a few L2 tokens within the Ethereum ecosystem to consider: $OP, $MATIC, $METIS, $DYDX, $GMX.

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