Bitcoin, Ethereum Rally Following Latest ETH Futures ETF Application, Where Next?

BITCOIN (BTC), ETHEREUM (ETH) KEY POINTS:

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Bitcoin has held up well over the past couple of weeks as markets in general face a host of uncertainties and risk-off sentiment. The idea of higher rates for longer has not had any material impact on Crypto, with both Bitcoin and Ethereum rising this week.

The weaker US Dollar today has helped Crypto with BTCUSD rising around 3% on the day and testing a descending trendline. Crypto enthusiasts have been punting for a bullish Q4 ahead of the ‘Halving” event next year. Historically speaking over the past 3 or so years Crypto has actually struggled during Q4, which begs the question of whether we are in for a change or not?

There is a general sense of fear which seems to be prevailing at present given the overall market developments of late. The idea of higher rates for longer s seen as a threat by many Crypto enthusiasts heading into Q4 as higher rates may mean that market participants opt for US Treasuries. The risk/reward profile given the current conditions bode well for US Treasuries but could weigh on Risk Assets and Cryptocurrencies. Higher interest rates could also have an impact on consumer spending and diminish discretionary income which could hurt the retail sector of the crypto industry. The chart below provides a good indication of where Crypto enthusiasts stand in terms of the Fear and Greed index at the moment.

Source: FinancialJuice

Looking at the numbers and the famous Warren Buffet quote came to mind, which goes “buy when others are fearful”.

VANECK READIES ETHEREUM FUTURES ETF

Asset Management Firm VanEck are preparing to roll out its Ethereum futures ETF as the race for ETH futures continues to heat up. The fund is to be called VanEck Ethereum Strategy ETF will invest in standardized, cash settled ETH futures contracts traded on commodity exchanges registered with the Commodity and Futures Trading Commission (CFTC). This was communicated by the firm in a statement earlier today.

Now in October we are expected to hear whether a host of spot Bitcoin ETFs will be approved by the SEC which could be game changer for the industry and see a massive influx of institutional funds. There is already a few Bitcoin Futures ETFs with the VanEck Bitcoin Strategy ETF (XBTF) listed on the CBOE which is where the Ether ETF will be listed as well.

In August there was a report by Bloomberg which stated that US Securities Regulators were poised to approve Ether ETFS Futures for US trading. This went quiet however, as the spot Bitcoin applications have been dominating the news since. The report also states that many firms have already filed applications for a futures ETF which means today’s announcement by VanEck is nothing new or unexpected. Q4 is going to be an interesting one with regards to both the spot Bitcoin ETF and Ether futures ETF. The SEC has come under increasing scrutiny regarding a perceived agenda against the Crypto industry which means any decision it makes is likely to come under severe scrutiny.

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TECHNICAL OUTLOOK AND FINAL THOUGHTS

From a technical standpoint BTCUSD has broken back above the 27k mark having printed a higher low this week. Is this a sign that price action has finally shifted bullish once more? Quite possibly, but I will wait for a breakout of the descending trendline which price is currently testing.

A break above the descending trendline brings an interesting confluence area around the 28k mark into focus. The 28k mark has been a key area of resistance for some time but now has the 100 and 200-day MAs to provide another layer of resistance. BTCUSD has struggled to trade above the 100 and 200-day MA since breaking below in the middle of August. Is the world’s largest crypto ready to break back above and reclaim the 30k mark?

BTCUSD Daily Chart, September 28, 2023.

Source: TradingView, chart prepared by Zain Vawda

Ethereum (ETH/USD) looks almost identical from a price action perspective having printed a higher low ahead of the upside rally today. Gains for the day sit at 3.6% (at the time of writing) with the 50-day MA providing some resistance.

In order to confirm a change in structure a daily candle close above the 1647 mark is needed which could then open up a run toward the 100 and 200-day MAs which rests at 1772 and 1805. The 1805 handle should be key as that is the level where the August selloff began and could prove a tough nut to crack.