Investors are anticipating that ethereum (ETH-USD) could be the next cryptocurrency included in a spot exchange-traded fund (ETF), leading to a shift in market sentiment, an analyst told Yahoo Finance UK.
Zodia Markets CEO Usman Ahmad told Yahoo Finance Future Focus: “Ethereum is where the market is looking next for a spot ETF approval.”
Read more: Turning assets into tokens on blockchain is $15tn market, says analyst
After the US Securities and Exchange Commission (SEC) approved the first US-listed ETFs to track bitcoin (BTC-USD) earlier in January, investors are anticipating the potential approval of spot ether ETFs.
Market shifts focus to ether
Ahmad said that the market had initially priced in the approval of a spot bitcoin ETF. Once this became a reality, attention turned to ethereum. He highlighted a price increase of around 10% to 12% for ether after the approval of multiple spot bitcoin ETFs, indicating that ethereum is now in the spotlight for the next potential ETF approval.
“It is difficult to forecast whether ether will outperform bitcoin because now that bitcoin has an ETF wrapper, there is potentially more demand,” Ahmad said. Bitcoin has seen increased demand due to its newfound accessibility through ETFs.
Read more: Crypto live prices
Taking a longer-term view, he expects bitcoin to continue performing well and experiencing a price increase as it becomes more widely accessible to the mass market.
Ahmad also observed that fund managers such as BlackRock (BLK), who filed an application for a spot ether ETF with the SEC in November 2023, might pave the way for the market to gain access to baskets of crypto assets within ETF wrappers in the future.
Spot bitcoin ETF a ‘sell the news’ event
Although the price of bitcoin has decreased from a post-ETF approval peak of over $48,000 to its current value of around $42,000, investors remain optimistic that spot Bitcoin ETFs will pave the way for mainstream capital to enter the cryptocurrency market.
Read more: US crypto crackdown ‘an opportunity for the UK’
Despite the short-term fluctuations, Ahmad said: “In the medium to longer-term, we will see a stabilization and long-term positive tailwinds for Bitcoin price action and volume activity going forward.”
Possibility of another rate pause
Switching gears to the macroeconomic perspective, Ahmad discussed the potential for a US interest rate pause and its implications for investor confidence in capital allocation strategies. He pointed out that after a rapid increase in rates following 15 years of near-zero interest rates, the market is now likely to experience another rate pause at this week’s US Federal Reserve meeting.
This pause may provide investors, particularly those dealing with risk assets like bitcoin and digital assets, with more confidence to allocate capital to this asset class, according to Ahmad.
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