Original author: ASHU GOLA
Original compilation: Deep Chao TechFlow
January 10 is the deadline for the SEC’s decision on a Bitcoin ETF, and the market is optimistic about the approval of a Bitcoin ETF. This pivotal event could have widespread implications for the crypto market, including Ethereum, the second-largest cryptocurrency by market capitalization.
If a Bitcoin ETF is approved, Ethereum’s price could rise by as much as 75% in the coming months.
Ethereum ETF
Approval of a Bitcoin ETF could set a regulatory precedent and pave the way for other cryptocurrency-based ETFs by establishing a framework that would apply to other cryptocurrencies, including Ethereum.
In December 2023, the SEC postponed a decision on several U.S. Ethereum ETF applications until May 2024, including the Hashdex Nasdaq Ethereum ETF, Grayscale Ethereum Futures ETF, VanEck Ethereum Spot ETF, and ARK Invest by Cathie Wood and Ethereum Spot ETF submitted by 21 Shares.
The delay in approval is part of the SEC process that requires time to gather public input before deciding whether the ETFs should go public. However, they also emerged during the committee’s efforts to classify 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 also did not challenge Ethereum’s classification through the Commodity Futures Trading Commission’s (CFTC) ETF registration process.
This raises the possibility of a spot Ethereum ETF being approved in the United States in May 2024, which could boost ETH prices.
Ethereum-Bitcoin Correlation
If the approval of a Bitcoin ETF does not turn into a “sell-the-news” event, Ethereum’s price is poised to rise significantly due to its correlation with BTC prices in recent years.
Fundamentally, the approval of a Bitcoin ETF could lead to increased investment in cryptocurrencies from traditional financial investors. This, in turn, could cause ETH prices to rise in anticipation of increased demand.
Conversely, a delay or rejection of a Bitcoin ETF could lead to a short-term pullback. A recent Bitwise survey found that only 39% of U.S. financial advisors believe a Bitcoin ETF will be approved this year.
Technical indicators
Judging from the K-line technical indicators, the price of ETH has been approaching the resistance trend line of its rising wedge pattern recently. Delay or rejection of the Bitcoin ETF could lead to a pullback to the wedge’s lower trendline near $1,865 in February.
The $1865 level coincides with ETH’s 0.236 Fibonacci line and its 50-week exponential moving average (the red wavy line on the chart above).
On the other hand, ETF approval could invalidate Ethereum’s rising wedge entirely in favor of an ascending triangle reversal pattern, as shown below.
If so, by March, Ethereum could rise to the triangle’s upside target near $3,870, a 75% upside from current price levels that coincides with the 0.786 Fibonacci line.
