Why Ethereum Price Surged
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NOIDA (CoinChapter.com)— Ethereum (ETH) experienced a significant surge in price due to a combination of technical and fundamental factors. The reasons behind today’s increase in Ethereum price include positive funding rates, rising open interest, and the approval of Spot ETH ETFs by the Securities and Exchange Commission (SEC).
ETH price over the past 7 days. Source:
CoinStats
ETH price has risen by almost 30% since May 20, reaching a daily high near $3,945 on May 27. This highlights the strong momentum driving the token’s prices.
Funding Rate and Open Interest
One of the main factors contributing to Ethereum’s current surge is the favorable funding rate and increasing open interest. The funding rate, which ensures that the price of perpetual futures contracts aligns with the underlying asset price, has remained positive.
ETH OI-Weighted Funding Rate. Source:
Coingl
a
ss
This indicates that long positions, which bet on price increases, are paying short positions. A consistently positive funding rate suggests a strong bullish sentiment among leveraged traders, as they are willing to pay a premium to hold long positions.
ETH Futures Open Interest.
The open interest, which measures the total number of outstanding derivative contracts, has also been on the rise. This increase indicates an influx of money into the market, reinforcing the bullish outlook.
Furthermore, the spike in open interest aligns with the increase in ETH prices, indicating growing confidence and participation in Ethereum’s upward momentum.
The correlation between rising open interest and price surges typically signals strong investor interest and market confidence, further explaining Ethereum’s current surge.
SEC’s ETH ETF Approval as a Driver
Another significant driver behind Ethereum’s price surge is the recent approval by the SEC for several Ether-based ETPs. On May 23, 2024, the SEC granted accelerated approval for the listing and trading of shares of Ether-based ETFs on major exchanges such as NYSE Arca, Nasdaq, and Cboe BZX.
The approval includes products like the Grayscale Ethereum Trust, Bitwise Ethereum ETF, iShares Ethereum Trust, VanEck Ethereum Trust, ARK 21Shares Ethereum ETF, Invesco Galaxy Ethereum ETF, Fidelity Ethereum Fund, and Franklin Ethereum ETF.
Traders
believe
that the ETF approval could be a significant bullish signal for ETH.
Moreover, this landmark approval is crucial for several reasons. Firstly, it provides a regulated and secure investment avenue for both institutional and retail investors, likely leading to increased mainstream adoption of Ethereum.
With these ETFs, investors can gain exposure to Ethereum without directly purchasing the cryptocurrency, reducing some of the risks associated with holding and securing digital assets. Additionally, the approval also serves as an endorsement of Ethereum’s legitimacy and stability as an investment asset.
By meeting the SEC’s stringent regulatory requirements, the Spot ETH ETFs provide investors with a sense of confidence in introducing Ethereum to their portfolios. The excitement surrounding this regulatory approval could be a contributing factor to Ethereum’s current surge.
If ETH’s price follows a similar trajectory as Bitcoin’s following the approval and launch of a Spot Bitcoin ETF, it could potentially reach $7,174.
Bullish Technical Pattern in ETH Price
Meanwhile, the ETH price has formed a bullish technical pattern known as the ‘bull flag pattern.’
ETH price formed a bullish pattern with a 90% upside target. Source:
Tradingview.com
A bull flag pattern occurs when the price of a crypto token experiences a rapid upward movement, creating the flagpole. This pattern is commonly observed in assets that are in a strong uptrend.
Following the steep ascent, the asset undergoes a consolidation phase, forming the flag of the pattern. Despite the initial strong rally, the price remains stable as buying pressure persists. Typically, a breakout from this consolidation phase triggers another significant uptrend.
The pattern reaches completion when the price breaks out from the flag area, resuming the previous upward trajectory. Traders estimate the price target of the breakout by adding the length of the flagpole to the breakout price level.
According to the principles of technical analysis, if the token confirms the bullish technical pattern, the ETH price could potentially rally over 90% and reach the theoretical price target near $7,420. It appears that $7,000 is the target for Ethereum’s bullish investors.
The Surge in Ethereum’s Price: Unraveling the Factors Behind Today’s Uptick
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