Research Summary
The report discusses the potential approval of spot Ether ETFs and suggests a Call Ratio Spread strategy for traders anticipating limited upward movement on ETH ETF’s approval. It also provides a historical context of market reactions to similar events and a technical analysis of Ethereum.
Key Takeaways
Progress on Spot Ether ETFs
- SEC’s Positive Stance: SEC Chair Gary Gensler has indicated that the launch process for spot Ether ETFs is progressing smoothly. The SEC has given preliminary approval for eight Ethereum ETFs and is currently reviewing amended registration statements from issuers.
- ETF Issuers’ Readiness: Asset managers like BlackRock, Fidelity, and Franklin Templeton, who have already launched spot Bitcoin ETFs, have applied to issue spot Ether ETFs. VanEck has also filed a Form 8-A for its Ethereum ETF.
Historical Market Reactions
- Pattern of Corrections: Historically, the listing of regulated exchange products has been followed by Bitcoin corrections. This pattern was observed with the CME Bitcoin Futures launch in December 2017, the Coinbase IPO in April 2021, the Bitcoin ETFs based on Futures in October 2021, and the Bitcoin ETFs based on Spot in January 2024.
Proposed Trading Strategy
- Call Ratio Spread: The report suggests a Call Ratio Spread strategy for traders expecting limited upward movement on ETH ETF’s approval. This involves buying a Call option that is OTM, and then selling two Calls of the same expiry, further OTM. The maximum profit from this strategy would be realized if Ethereum prices are at $4,000 when the options expire on July 26th.
Technical Analysis of Ethereum
- Resistance at $3,700: The report identifies the $3,700 level as a crucial pivot for Ethereum. With the news of ETF approval, Ethereum’s price could aim to breach $3,700, and witness $4,000 mark but due to the high resistance at this pivot point, it could result in a “sell the news” scenario.
Actionable Insights
- Monitor Regulatory Developments: Traders should keep a close eye on the SEC’s actions regarding the approval of spot Ether ETFs. The approval seems imminent and could have a significant impact on Ethereum’s price.
- Consider Call Ratio Spread Strategy: If traders anticipate continued resistance at the $4,000 levels in ETH, they may consider implementing a Call Ratio Spread strategy. This strategy could help capitalize on the anticipated price movements.
- Watch Key Resistance Levels: Traders should pay attention to the $3,700 resistance level for Ethereum. A breach of this level could lead to a run towards the $4,000 mark, but a “sell the news” scenario could also occur.
