The cryptocurrency market encountered challenges this week, particularly impacting crypto Exchange-Traded Funds (ETFs). The theme of cryptocurrency investment witnessed an overall decline of 5.99%, reflecting setbacks in major cryptocurrencies. Bitcoin retreated by 2.25%, slipping below the $70,000 mark, while Ethereum faced an even steeper decline, plummeting by 6.5%.

Challenges with SEC and Spot ETFs

The recent setback stemmed from actions by the U.S. Securities and Exchange Commission (SEC). The regulatory body initiated a three-week comment period regarding proposals for spot Ether ETFs, effectively postponing any possibility of approval until at least May. This delay subdued investor optimism, especially among those expecting prompt approvals for spot ETFs representing direct investments in cryptocurrencies, as opposed to derivatives.

Impact on Crypto ETF Performance

Particular crypto ETFs bore the brunt of these developments. The Ether Tracker Euro ETC (ETHEREUM XBTE) and the 21Shares Ethereum Staking ETP (AETH) experienced declines of 7.96% and 7.63%, respectively. These setbacks highlight the heightened sensitivity of crypto ETFs to regulatory decisions and market sentiment as investors navigate the uncertain landscape of cryptocurrency regulations and their implications for spot ETFs.

The SEC’s decision to postpone approvals for spot ETFs has cast a shadow over the future of Ether ETFs, temporarily halting the momentum that had been building in anticipation of broader institutional acceptance. While these ETFs offer a regulated avenue for investors to gain exposure to cryptocurrencies, the path forward appears to be mired in regulatory uncertainty, impacting both investor sentiment and ETF performance.

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According to a survey by Deutsche Bank released on Monday, consumers are showing slightly diminished skepticism towards bitcoin, though nearly one-third of respondents still foresee a significant drop in its price by the conclusion of 2024.

Despite substantial investments poured into bitcoin with hopes of capitalizing on price surges, leading regulators have asserted its lack of intrinsic value and associated risks.

Deutsche Bank’s survey encompassed over 3,600 participants, with 52% expressing the belief that cryptocurrencies will emerge as an “important asset class and payment method” in the future. This marks a shift from less than 40% in September 2023.

One-third of respondents in the United States anticipate bitcoin’s value to dip below $20,000 by the end of 2024. Notably, this demographic is marginally diminishing, having comprised 35% in February and 36% in January.

The segment of individuals regarding cryptocurrencies as a “temporary trend destined to fade away” dwindled to less than 1%.

However, merely 10% of those surveyed expect bitcoin to surpass $75,000 by year-end.

Context

Bitcoin ascended to a three-week peak on Monday, having achieved an all-time high of $73,803.25 in March after rebounding from a significant downturn in 2022.

Analysts attribute the recent resurgence to anticipation surrounding spot bitcoin ETFs and expectations of impending interest rate reductions.

What’s Ahead

Some analysts interpret bitcoin’s recent rebound beyond $70,000 as a sign of investors disregarding cautionary advice.

Deutsche Bank analysts anticipate support for bitcoin’s price from forthcoming events such as the “bitcoin halving,” regulatory measures, central bank rate cuts, and the potential approval of spot ethereum ETFs by the SEC.

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A recent analysis of Ether options’ open interest for the end of April expiry suggests a prevailing bullish sentiment in the market, with an underlying bias toward upward movement, according to industry experts.

The largest cohort of ether options open interest, set to expire at the end of April, demonstrates a significant tilt toward bullish positions, with approximately $3.3 billion of notional ether options slated to expire, as per Deribit data. Around two-thirds of this total have been placed on calls, representing bullish bets on price movement.

Wintermute OTC Trader, Jake Ostrovskis, highlighted that call strikes are concentrated between $3,700 to $4,000, indicating an inclination toward upside movement and an overall bullish sentiment in the market.

Moreover, Ostrovskis pointed out that the current open interest skew favors call trading at a premium to puts, coupled with a notable increase in implied volatility over the weekend. This suggests a stronger directional bias and reduced dependence on writing options to finance premiums.

Bullish Put-Call Ratio

Deribit data reveals that the ether put-call ratio for the end of April expiry stands at 0.45, slightly more bullish compared to bitcoin options, which have a put-call ratio of 0.48. Ostrovskis attributes this trend to traders identifying relative value in ether, especially considering its underperformance compared to Bitcoin in 2024.

A put-call options ratio below one signifies that call volume exceeds put volume, indicating bullish sentiment in the market. This trend is further underscored by Monday’s ether put-call ratio on Deribit for all expiries, which has fallen to 0.4, reaching a low not seen since late February, according to The Block’s Data Dashboard.

Despite the bullish outlook, Ostrovskis cautions against perceived negative impacts from regulatory changes, such as the ongoing scrutiny from the SEC regarding Ether’s classification as a security. Additionally, skepticism persists regarding the likelihood of an ETF approval by June 30th, 2024, with market sentiment indicating only a 17% probability. Even positive developments, such as the SEC soliciting comments on spot ether ETFs, have not been fully embraced by the market.

Ether Price Movement

Ether has observed a notable 6.8% increase in the past 24 hours, trading at $3,645 at 11:14 a.m. ET, according to The Block’s Price Page. This surge in price further reinforces the bullish sentiment prevalent in the options market for the end of April expiry.

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In recent days, the Solana network has encountered congestion issues attributed to a surge in spam transactions, prompting developers to spring into action with various solutions.

Solana developers are actively addressing the congestion dilemma as users grapple with delays and dropped transactions, particularly noticeable on the Phantom wallet app and other platforms. The root cause of this congestion lies in the influx of spam transactions, aggravated by a spike in memecoin-related activities, which strain the network’s block space and impede regular user access.

In the first quarter of 2024, we witnessed a notable uptick in memecoin activity on the Solana blockchain, reflecting the growing interest among new and retail users lured by the network’s cost-effective transaction fees. However, the surge in spam transactions has become a bottleneck for Solana’s operation.

Matt Sorg of the Solana Foundation likened Solana’s architecture to that of the internet, highlighting its decentralized transaction processing system. Unlike traditional setups with mempools, Solana dispatches transactions directly to block leaders, potentially leading to transaction drops under a heavy spam load.

In response, the Solana development team is actively devising solutions, including software patches. Anatoly Yakovenko, co-founder of Solana, anticipates improvements in the coming week as bug fixes roll out.

Anza, the developer of Solana’s Agave validator client, also addresses specific issues within its QUIC implementation to enhance performance under high request volumes.

The upcoming 1.18 update, slated for April, aims to make transaction scheduling more deterministic to streamline processing and alleviate bottlenecks. Additionally, implementing priority fees across Solana applications will mitigate delays and enhance user experience, as highlighted in a March blog post from Solana Labs.

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