Asset management giant Fidelity just filed a 19b-4 with the Chicago Board Options Exchange (CBOE) to set up a spot Ethereum exchange-traded fund (ETF) called the Fidelity Ethereum Trust, just one day after BlackRock filed to set up the iShares Ethereum Trust, its own spot Ethereum ETF.
The latest move to offer a spot Ethereum ETF to investors comes as major asset managers double down on bets that cryptocurrencies have a bright future, and that their new proposed crypto investment vehicles will gain quick approval in the US.
Both asset managers plus a dozen others filed to set up spot Bitcoin ETFs back in June, with many analysts betting that these applications will gain approval as soon as January.
Fidelity manages over $4.5 trillion in investor funds, whilst BlackRock manages over $8 trillion, making it the largest asset manager in the world.
Ether (ETH), the official name of the cryptocurrency that powers the Ethereum network (though many also wrongly refer to the cryptocurrency itself as Ethereum), was relatively unmoved by the news of Fidelity’s approval.
ETH was last changing hands just above $1,950, having dipped over 4% this week as traders take profit in wake of the cryptocurrency’s recent failure to break above its yearly highs in the $2,100s.
Where Next for Ether (ETH)?
Despite its recent pullback, ETH is still up an impressive 28% versus its October lows.
The cryptocurrency has been a beneficiary of a broader market rally driven by 1) optimism about expected near-term spot Bitcoin ETFs and 2) an improvement in the macro backdrop as investors bet the Fed’s tightening cycle is over, with US stock rallying and US bond yields and the dollar dumping this month.
More recently, ETH has been supported by the news that major asset managers are looking to set up their own spot Ethereum ETFs.
But this news hasn’t resulted in a lasting market pump.
Indeed, Ether’s 28% gains since mid-October look weak when compared to Bitcoin’s 45% gain over the same time period.
Ether’s continued underperformance is difficult to understand in wake of the recent improvement in on-chain activity that has turned the Ether supply deflationary once again, as shown in data presented by Glassnode.
Perhaps investors are still worried about the poor demand that recently launched Ether futures ETFs attracted in the US, and assuming that this might translate into poor demand for spot Ethereum ETFs.
But with the outlook for the broader market looking up and Ether chart analysis looking bullish, Ether price risks are likely strongly tilted to the upside.
If Ether can break to the north of the hugely important support-turned-resistance $2,150 area, then the door is open (technically speaking) to a quick rally back towards the next major level around $3,600.
Narratives around spot ETFs, a bullish macro backdrop and Ether deflation could all offer more support to the cryptocurrency in the coming months.
And if long-term US government bond yields fall below Ether token staking returns (currently around 4%), which is highly likely if the Fed starts cutting interest rates, Ether could get another bullish narrative (i.e. the hunt for yield).