Analysis firm Kaiko: Ethereum's bull market still in the starting blocks

21/01/2024
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Crypto analytics firm Kaiko reports that the 'Fear of Missing Out (FOMO)' on Ethereum (ETH) has not yet begun, despite it having recovered significantly from its 2022 lows.

In a new report, Kaiko says Bitcoin has benefited from the hype surrounding the approval of BTC exchange-traded funds (ETFs) in the US, but speculation on an Ethereum ETF has not yet begun.

The US Securities and Exchange Commission (SEC) recently decided to delay its decision on the application for a spot market Ethereum ETF by banking giant Fidelity until March.

"There is some hype around ETH ETF applications, but the data suggests that aggressive speculation has not yet begun. ETH trading volume has increased, but derivatives markets lack the clear signs of traders positioning themselves for a rally. ETH futures ETFs have also had a few slow months of trading.

The correlation between ETH and BTC has fallen to multi-year lows as each asset matures and develops its own stories. While ETFs have been one of the most catalytic stories in BTC history, it remains to be seen whether ETH can replicate this. However, ETH has many stories it can lean on; if ETFs don't spark enthusiasm, perhaps new Layer-2s or the success of EigenLayer and restaking can."

Kaiko says derivatives data also indicate that recent ETH moves have largely been driven by spot markets rather than perpetual futures, which it says is evidence that traders are not using leverage in anticipation of an ETH ETF:

"September and October marked lows in futures markets, with aggregate open interest (in USD) falling more than 20% from summer levels. At that time, there was little price movement and funding rates were neutral….

After BTC's adoption, funding rates reset to neutral, while open interest was ahead of price, indicating increased shorting. Still, we have not yet seen a large build-up in open interest typical of a bull market."

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