SEC's Impact on the Ethereum Market

In just over a week since the United States Securities and Exchange Commission (SEC) approved spot Ethereum (ETH) exchange-traded funds (ETFs), cryptocurrency exchanges have seen substantial ETH outflow. This demonstrates the impact of regulatory decisions on market dynamics.

Since the securities watchdog approved Ethereum spot ETFs on May 23, 2024, approximately 777,000 ETH—valued at around $3 billion—has left crypto exchanges.

Renowned crypto trading expert Ali Martinez shared this data in an X post on June 2.

Ethereum Price and Market Behavior

Indeed, the analyst's Glassnode chart showcases the massive changes in Ethereum's total balance on all crypto exchanges.

The balance witnessed a significant drop in the days following the approval, reducing to around 12.5 million ETH, coinciding with a price increase.

At press time, Ethereum was trading at $3,821.12, suggesting an increase of 0.75% in the last 24 hours. It had declined 2.43% over the previous seven days and advanced 22.94% on its monthly chart.

Whales and Institutional Investors

More recently, Ethereum has demonstrated significant strength against Bitcoin (BTC), reclaiming a critical trendline that has been important for over seven years.

The price of Ethereum started to increase on May 20, not long after Bloomberg's senior ETF analyst Eric Balchunas and his colleague James Seyffart suggested a 75% chance for the approval of a spot Ethereum ETF.

During this period, Martinez noted that Ethereum whales had bought 110,000 ETH, worth about $341 million, in the 24 hours leading up to his X post on May 20. This indicates a significant increase in interest from the market's largest holders in anticipation of the spot ETF approval.

CryptoQuant Analysis

Significant movement has occurred in the crypto market since the SEC's preliminary approval for spot Ethereum ETFs.

A recent analysis by CryptoQuant highlights that unidentified entities have withdrawn over 800,000 Ethereum (ETH) from crypto exchanges, valued at approximately $3 billion.

Burak Kesmeci, an analyst at CryptoQuant, speculated that these transactions originated from either individual crypto whales or institutional investors.

"These institutions may want to meet the demand of their investors with the launch of the spot Ethereum ETF," Kesmeci wrote.

Despite the anonymity surrounding these transactions, both are drawn to market behavior observed after the approval of spot Bitcoin ETFs.

Market Predictions and Future Outlook

The migration of such a large volume of ETH from exchanges typically indicates a preference for holding assets in self-custodial platforms, leading to tighter supply conditions on crypto exchanges.

Kesmeci projected that the current withdrawals would positively influence Ethereum's price in the medium term.

The reduction in exchange-held ETH often hints at a future supply squeeze, potentially driving prices higher as availability diminishes.

Indeed, the preliminary approval for spot Ethereum ETFs has infused renewed optimism in the market and broader crypto industry. Some protocols in the Ethereum ecosystem, like Aave and Uniswap, experienced a total value-locked increase during this period.

Bloomberg ETF analysts James Seyffart and Eric Balchunas predict that the Ethereum ETFs could capture 10% to 20% of the flow seen by their Bitcoin counterparts.

Seyfarth and Balchunas expect final approval for the Ethereum ETFs by July, suggesting that the market could see even more significant movements in the coming months.