W Power 2024

Ether ETF approval faces an uphill battle in May, Standard Chartered warns

The bank restated its year-end Bitcoin and Ether targets at $150,000 and $8,000, respectively

Shashank Bhardwaj
Published: Apr 26, 2024 04:57:14 PM IST
Updated: Apr 26, 2024 06:16:01 PM IST

Analysts have warned that an Ethereum ETF might not mirror the success of Bitcoin ETFs. The approval of spot Bitcoin ETFs in January helped fuel a rally in the biggest cryptocurrency. However, Standard Chartered is not bearish on the overall digital asset market despite its changing view on the prospects for an Ether ETF.

The cryptocurrency market has endured a perfect storm of negative headwinds in recent weeks, but the investment bank believes the worst is over, and the market is well-positioned to recover. "Bitcoin exchange-traded fund (ETF) inflows have stalled, and ether ETFs now look unlikely to be approved in May as expected," said Geoff Kendrick, an analyst at Standard Chartered.

According to the investment bank, the SEC has taken aim at the decentralised finance (DeFi) space by suing Uniswap, while the US Treasury yields have jumped and Federal Reserve rate cuts have been pushed back. These macroeconomic factors, coupled with the escalation of the conflict in the Middle East, have put downward pressure on risky assets like Bitcoin (BTC) and Ethereum (ETH).

However, Standard Chartered remains cautiously optimistic about the long-term prospects of the digital asset market. The bank believes that the bad news is already priced in for both Bitcoin and Ethereum and "positive structural drivers" are expected to take over again. Also, the bank has reiterated its end-of-year price targets of $150,000 for Bitcoin and $8,000 for Ethereum.

The report also noted that market positioning has become much cleaner, with $261 million of leveraged long positions being removed from the Bitcoin futures market on April 13 in response to the geopolitical tensions in the Middle East. This was the largest daily liquidation since October 2023. Additionally, the bank suggests that Bitcoin spot ETF inflows have likely slowed due to macroeconomic factors, including higher U.S. Treasury yields and the ongoing geopolitical turmoil.

Moreover, the initial surge in ETF purchases is likely nearing its conclusion, signalling a temporary halt to a significant market catalyst, as indicated by the bank. The subsequent buying phase will involve integrating these ETFs into broader macro funds, although this process may unfold gradually.

Additionally, as of yesterday, Grayscale’s GBTC leads the pack of U.S. Bitcoin ETF holdings with 302,663 BTC, representing 1.441 percent of the total Bitcoin supply. iShares Bitcoin Trust, overseen by BlackRock, holds 274,462 BTC, comprising 1.30 percent of the total supply. Also, the Fidelity Wise Origin Bitcoin Fund (FBTC) holds 153,995 BTC, representing 0.733 percent of 21M BTC.

Shashank is the founder of yMedia. He ventured into crypto in 2013 and is an ETH maximalist.
Twitter: @bhardwajshash