ETH ETF Momentum: Tradfi Transition

After a span of two months, signs are emerging that "tradfi" might be entering the realm of ETH ETF trading. According to the latest findings from Reflexivity Research, the annualized basis on CME has steadily risen, breaching the 18% mark. Concurrently, Bitcoin's open interest on CME has consistently expanded, crossing the $4.5 billion threshold since this trend initiated two months ago.

An intriguing pattern surfaces when scrutinizing CME activities for Bitcoin and Ethereum. Velo Data's analysis indicates that the current trading basis for Ethereum futures on CME holds a 5% premium over Bitcoin, surpassing 20%. Additionally, the open interest for ETH on CME is on the rise, although it lags behind the initial surge witnessed in Bitcoin.

While it might be premature to confirm, there are signals suggesting that "tradfi" could be making a move toward the ETH ETF trade following this two-month period. Simultaneously, the narrowing of the Grayscale discount is noteworthy, dipping below 10% for the first time since July 2021. This reduction signifies an increasing demand for Bitcoin exposure and speculation regarding the potential approval of a Bitcoin ETF. It also reflects the transformation of GBTC's trust structure into an ETF.

The report also highlights a parallel trend in Grayscale's ETHE product, with its discount to NAV now standing below 15%. Meanwhile, implied volatility in the options market has consistently decreased amid the gradual upward trajectory of both Bitcoin and Ethereum. However, a slight uptick in volatility for the 1-week and 1-month periods accompanies the recent rapid price surge.

With volatility now below 60%, the asset appears attractive, especially considering its historical volatility of up to 80%. It seems to be awakening from a dormant period, adding an extra layer of allure to its current market dynamics.

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