The price of Ether (ETH) surged by 24.50% in the last 24 hours to reach around $3,790, its highest level in two months, on May 21. The second-largest cryptocurrency outperformed the broader crypto market whose gains stood around 11%.
The recent surge in Ether's price is driven by two key factors: increasing chances of U.S. approval for a spot Ethereum exchange-traded fund (ETF) and a recent Department of Justice indictment that diminishes the likelihood of ETH being classified as a security.
Spot Ethereum ETF has 75% chance of approval
The U.S. Securities and Exchange Commission (SEC) has reportedly contacted at least one cryptocurrency exchange and potential spot-Ether ETF issuer to update their related 19b-4 filings. Fidelity Investments, one of the ETF applicants, has already amended its application by removing its ETH staking plans.
Bloomberg ETF analyst Eric Balchunas and research analyst James Seyffart increased their odds of spot Ether ETF approval from 25% to 75% after the report.
Meanwhile, Standard Chartered analyst Geoff Kendrick anticipates that the SEC will approve the investment product sometime this week, leading to inflows of $15 billion to $45 billion in the first 12 months.
These events have raised investors' appetite for Ether in the short term, akin to what transpired in the Bitcoin (BTC) market ahead of its ETF approvals in January.
ETH is unlikely to be classified as a security
Ether’s recent surge was also influenced by an indictment unsealed by the U.S. Department of Justice on May 15.
The indictment accused two individuals of wire fraud and money laundering for manipulating the Ethereum blockchain. It highlighted that "Ethereum is a decentralized blockchain […] without the need for a trusted intermediary” and that “no central actor runs the Ethereum Network.”
Furthermore, the court acknowledged that Ethereum smart contracts facilitate transactions without requiring a trusted intermediary.
These statements bolstered investor confidence in Ether, especially after the SEC issued a Wells notice to Robinhood on May 4 for alleged securities violations related to crypto listings and custodian operations.
Orlando Cosme, founder and CEO of Lexproof, noted that such a verdict challenges regulators’ classification of ETH as a security, implying “there would be no management or entrepreneurial efforts of others.”
Ether open interest, funding rate rise sharply
Ether's price rally further coincides with a sharp increase in its open interest (OI) and funding rates.
On May 21, Ether Futures OI jumped by over $3 billion to $14.68 billion, while the funding rate increased to a one-month high of 0.567% per week.
High OI typically signifies growing investor interest and confidence in the asset, suggesting that traders are positioning themselves for potential price movements.
Meanwhile, a high funding rate indicates that more traders are betting on the price of Ether going up (long positions) than those betting on it going down (short positions). This suggests a bullish sentiment among traders, who are willing to pay a premium to maintain their long positions.
ETH price: falling wedge breakout
From a technical standpoint, Ether's gains today are part of a falling wedge breakout stage.
A falling wedge forms when the price trends inside a descending channel comprising two converging trendlines. Meanwhile, as a rule of technical analysis, the pattern resolves after the price breaks above its upper trendline and rises by as much as its maximum height.
Applying the same technical rule on the ETH chart brings its upside target at around $4,120 by May, up approximately 10% from the current price levels.