Ether price volatility set to increase in lead-up to this week's ETF decision deadlines, analysts say

Ether's price action could become increasingly volatile ahead of this week's spot exchange-traded fund filing decision deadlines, analysts say.

"In the lead-up to the spot ether ETF approval decision deadlines this week, we should expect heightened volatility and cautious market behavior as traders navigate uncertainties," Cobo COO Lily King told The Block.

Presto research analyst Peter Chung stated in a report on Monday, "Whether it's approval or disapproval, expect ether’s volatility to increase as the May 23 deadline approaches."

Derivatives traders react to impending decision deadlines

Monday's Kaiko Research market report observes options traders crowding around calls and puts, "suggesting ether could see some volatility before the end of May."

According to Chung, derivatives indicators suggest the market has yet to price in the impact of the U.S. Securities and Exchange Commission's ETF decisions this week on the second-largest digital asset by market cap.

"Currently bitcoin and ether's implied volatilities are at par, suggesting the market hasn't yet priced in ether’s expected volatility shift," Chung said.

This week's spot ether ETF filing decisions

The first round of spot ether ETF deadlines is approaching this week, with VanEck's on May 23 and Ark Invest/21Shares' on May 24.

However, most analysts expect the SEC to deny approval of the spot ether ETF filings, with Polymarket pricing only a 14% chance of approval. According to Monday's QCP Capital report, market indicators show traders are mostly anticipating "a rejection and a non-event."

A surprise approval could trigger short squeeze

However, the QCP Capital report added that a surprise approval of spot ether ETFs this week could catch everyone off guard.

"This would trigger a short squeeze taking us easily back to recent highs for ether," QCP Capital analysts said.

The analysts added that, given ether's dual role as both a store of value and a Layer 1 blockchain network, its approval would likely result in ether outperforming bitcoin in terms of price action.

Ether-bitcoin ratio downtrend

Monday's Kaiko research report shows ether trading down compared to bitcoin.

"Another sign that traders are pricing in an SEC spot ether ETF denial comes in the form of the ether to bitcoin ratio, which measures the relative performance of the two assets. The ratio has trended downwards since March, currently trading around 0.046," Kaiko analysts said.

This observation aligns with this week's QCP Capital report, which stated that in the lead-up to this week's spot ETF decision deadlines, the ether-bitcoin ratio had reached a low not seen since February 2021.

Ether's price has remained flat over the past 24 hours, at $3,084 at 10:24 a.m. ET, according to The Block’s Price Page.

The GM 30 Index, representing a selection of the top 30 cryptocurrencies, increased by 0.10% to 135.46 in the same period.

The price of ether held above the $3,000 mark on Monday. Image: The Block.