Ethereum (ETH) Fund Premium Surges: Potential Catalyst for New All-Time High?

• The recent surge in ETH’s Fund Market Premium is attributed to the unexpected approval of the spot ETH ETF applications by the U.S. SEC.
• The coin’s value may witness a brief pullback once buyers’ exhaustion sets in.
• ETH’s Fund Market Premium has reached its highest level since November 2021.

Ethereum’s Fund Market Premium Hits Three-Year High Amid ETF Approval

ETH Fund Market Premium Soars

Ethereum’s (ETH) Fund Market Premium has rallied to a three-year high, according to CryptoQuant’s data. Although the metric has maintained an uptrend since the beginning of May, most of the rally came after the U.S. Securities and Exchange Commission (SEC) approved the eight applications for spot ETH exchange-traded funds (ETFs) on 23rd May.

Understanding the Fund Market Premium

ETH’s Fund Market Premium measures the difference between the coin’s price in spot markets and the price of an Ethereum-based fund or trust. When this metric surges, it indicates a rising demand for ETH in investment funds. It means that investors are willing to pay a premium to gain exposure to Ethereum through investment funds rather than buying it at market prices on the spot market.

At press time, ETH’s Fund Market Premium was -0.81. According to CryptoQuant data, it last reached this high on 10th November 2021. A few days later, on 16th November, the altcoin clinched an all-time high of $4,891.

Coinbase Bears the Brunt

The declining Coinbase Premium Index (CPI) also depicted American investors’ preference for gaining exposure to ETH through investment funds. The coin’s CPI, which tracks the difference between its prices on Coinbase and Binance, has dipped back into negative territory, suggesting less trading activity on the US-based exchange. As of this writing, ETH’s CPI was -0.08.

Confirming this trend, the value of ETH’s Coinbase Premium Gap (CPG) was also negative at press time. A negative CPG indicates that the altcoin is trading at a lower price on Coinbase compared to other major exchanges. This may be due to a number of reasons, ranging from market imbalances to liquidity issues. But in this case, it is due to a shift in attention toward ETH-based investment products.

ETH to Witness a Slight Pullback

According to CoinMarketCap’s data, ETH exchanged hands at $3,859 at press time. As depicted by its rising key momentum indicators, ETH accumulation has significantly surged in the past few days. At press time, ETH’s Relative Strength Index (RSI) was 70.17, while its Money Flow Index (MFI) was 74.41.

It is key to note that at these values, buyers’ exhaustion might set in as the market becomes overheated. Hence, a potential minor price correction might be on the horizon.

Conclusion

The recent surge in ETH’s Fund Market Premium highlights a growing investor interest in Ethereum-based investment products. While this trend may continue to push ETH prices higher, market participants should be cautious of potential pullbacks as the market becomes overheated. Investors should keep an eye on key momentum indicators and market metrics to make informed decisions.