Ethereum: Should ETH traders really celebrate BTC ETF approval

• ETH’s open interest has increased by 15% in two days.
• With a BTC Spot ETF approval now granted, market volatility has set in. 

The derivatives market for Ethereum [ETH] has witnessed a dramatic surge in recent days, with open interest reaching multi-week highs, according to data from CryptoQuant.

This sudden spike in activity started after a now-debunked announcement emerged from the U.S. Securities and Exchange Commission’s (SEC) X account (formerly Twitter) stating that the regulator had given its approval for a Bitcoin-based exchange-traded fund (ETF).

At press time, ETH’s open interest across all exchanges was $6.4 billion, rising by 15% since the fake post was made on 9th January. 

Source: CryptoQuant

When an asset’s open interest climbs in this manner, it indicates more activity in the derivatives market for that coin. It could be that more people are entering or exiting positions, hedging their bets, or speculating on the price.

If the hike in open interest sees a corresponding uptick in price, it suggests new money is entering the market, potentially pushing the price further up. This has been the case for ETH, whose value has risen by double digits since 9th January, according to data from CoinMarketCap.

An assessment of the coin’s funding rates across derivative crypto exchanges confirmed this bullish trend. Since the open interest began to rally, ETH’s funding rates have been positive.

This suggested that most of the trading positions opened since 9th January have been in favor of continued price growth. 

With ETH’s price climbing, several short positions are being liquidated. According to data from Coinglass, as of 10th January, short positions worth $61.33 million were wiped off the market, compared to the $28.03 long liquidations recorded on the same day. 

Now that Bitcoin ETFs are here

In a later announcement on 10th January, SEC’s Chairman Gary Gensler confirmed the agency’s approval of all 11 spot Bitcoin [BTC] ETF applications. 

The long-awaited approval has since led to a rise in ETH trading activity in the last 24 hours. With an 80% growth in trading volume during that period, its price has increased by 10%, according to data from CoinMarketCap.

ETH’s price movements observed on a 12-hour chart confirmed the uptick in coin accumulation, with key momentum indicators pegged at overbought highs.

At press time, the coin’s Relative Strength Index (RSI) was 73.64, while the Money Flow Index (MFI) was 79.53.

Source: TradingView

Realistic or not, here’s ETH’s market cap in BTC terms

However, the price growth has led to a gradual upswing in market volatility. According to readings from ETH’s Bollinger Bands indicator, as of this writing, the upper and lower gaps that comprise this indicator were starting to widen. 

When these gaps widen, it indicates a rise in volatility. It often means that an asset’s price is experiencing larger swings than usual.