Ethereum price forecast for 2024: Is ETH headed for a bull run?

The U.S. Securities and Exchange Commission (SEC) approved the first spot Ethereum (ETH) exchange-traded funds (ETFs) last week. Ethereum price has surged in the anticipation of this decision with crypto experts now saying that the bull run has just started.

The wave of positive regulatory news did not stop there as the House of Representatives passed its first crypto bill, and the UK gave the green light to crypto exchange-traded products.

Signs that an approval was imminent appeared earlier in the week when several exchanges amended their filings to exclude staking. 

According to Kaiko Research’s latest analysis, the market had been gradually pricing out an ETF approval over the past month amid growing uncertainty around ETH's regulatory status.

“With these approvals, the SEC implicitly stated that ETH (without staking) is a commodity rather than a security. This isn’t just about access to ETH but has significant and likely positive ramifications on how all similar tokens will be regulated in the U.S. with respect to trading, custody, transfer, etc.,” Kaiko Research added.

ETH implied volatility for the nearest expiry surged from less than 60% on May 20 to nearly 90% on May 22 before retreating by the end of the week. This dramatic shift in sentiment was also evident in derivatives markets. 

Ethereum price hit a 2-month high on Monday as bulls try to break above the strong resistance zone that is surrounding the $4,000 level. 

“For a long time, Ethereum was cornered between narratives, often pursuing trends. We are finally seeing its relative market share catching up to its fundamentals. Bull runs are fueled by attention, inflows, and narratives, and Ethereum has been scoring points on all three fronts lately,” Kiril Nikolov, DeFi Strategist at Nexo, told Investing.com.

Nikolov anticipates “inflows will be at least proportional to the asset’s market cap in terms of size, or approximately 30-40% of those achieved by the spot Bitcoin ETFs in the U.S.”

“As long as inflows outpace Grayscale outflows, the remainder of the year could be incredible for Ethereum.”

A break above the 2024 high would open the door for a quick move towards the record high in ETH/USD, which was set in 2021. The next resistance zone is located near the $6,000 level. 

Open interest hits a new record high

Within just three days, ETH perpetual futures funding rates surged from their lowest level in over a year to a multi-month high. Open interest also reached an all-time high of $11 billion, suggesting strong capital inflows into the space.

The ETH to BTC ratio, measuring the two assets' relative performance, surged from 0.044 to 0.055, though it remains below February highs. The rally was broad-based, with both U.S. and offshore spot markets seeing strong net buying since May 21. Offshore exchanges had been registering net selling until then.

Looking ahead, the launch of ETH ETFs could bring selling pressure from likely outflows or redemptions due to Grayscale's ETHE, which has been trading at a discount between 6% and 26% over the past three months. 

ETHE currently holds over $11 billion in assets under management, making it the largest ETH investment vehicle. During the first month of bitcoin ETF trading, GBTC saw outflows amounting to $6.5 billion, roughly 23% of its AUM as of launch day.

Should a similar magnitude of outflows occur with ETHE, this would translate to $110 million in average daily outflows, or 30% of ETH's average daily volume on Coinbase (NASDAQ:COIN). However, GBTC's outflows were offset and surpassed by inflows from other BTC ETFs by the end of January.

"The overall market impact of ETHE's redemptions is still uncertain, especially considering the lackluster launch of Hong Kong ETFs," Kaiko Research stated. 

"Additionally, ETH's market depth on centralized exchanges is about $226 million, still 42% below its pre-FTX average levels, and only 40% is concentrated on US exchanges compared to around 50% in early 2023."