The cryptocurrency market is buzzing as Ethereum (ETH) surges 20% over the past 48 hours, fueled by growing optimism around the potential approval of a spot Ethereum ETF. While the momentum is strong, analysts are questioning whether ETH might follow Bitcoin’s path—where prices dipped after ETF approval—triggering concerns over a classic “buy the rumor, sell the news” market reaction.
Why Ethereum’s ETF Outlook Differs from Bitcoin’s
Historically, Bitcoin experienced a 17% drop shortly after its spot ETF was approved, as leveraged long positions were unwound and speculative traders cashed out. However, according to a recent report by Citi Group, Ethereum may avoid a similar fate. The key reason? Market expectations for an ETH ETF have not reached the same fever pitch as they did with Bitcoin.
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Citi suggests that if an Ethereum ETF is approved, it would likely come as more of a surprise than a foregone conclusion. This means fewer extreme speculative bets ahead of time, reducing the risk of a sharp post-approval sell-off.
Unlike Bitcoin, where ETF speculation built up over years, Ethereum’s regulatory path has been murkier due to questions about its classification as a security. This uncertainty has kept pre-approval positioning more moderate, which could work in ETH’s favor if the green light comes through.
Market Indicators Show Growing But Controlled Anticipation
Despite the rally, derivatives data shows relatively moderate open interest and funding rates in Ethereum futures compared to earlier highs. This indicates that while excitement is building, leverage remains under control—a healthy sign for sustainable price growth.
However, open interest has begun to climb, signaling increasing institutional and retail interest in a potential ETF launch. This gradual build-up contrasts sharply with the explosive leverage seen before Bitcoin’s ETF approval, suggesting that any post-approval correction in ETH could be less severe.
The Role of ETF Flows in Driving Price Performance
Since their launch in January 2024, spot Bitcoin ETFs have become a primary engine for BTC’s price action. Total net inflows into these funds reached $129 billion by May 20**, with Citi estimating that every $1 billion in inflows correlated with a 6% increase in Bitcoin’s price**.
Citi analysts project that if Ethereum ETFs launch and attract similar investor interest—adjusted for market cap—net inflows could range between $3.8 billion and $4.5 billion. This level of capital influx could potentially push Ethereum’s price up by 23% to 28%, assuming comparable investor behavior.
But several variables could influence this outcome:
- Divergent demand dynamics: Bitcoin is often seen as digital gold, while Ethereum powers smart contracts and decentralized applications.
- Asset rotation: Investors holding Bitcoin ETFs might shift capital into ETH ETFs, creating cross-market flows.
- Outflows during conversion: Existing Ethereum investment vehicles (like trusts) may see outflows as they convert to ETF structures.
- Pre-approval positioning: A sudden surge in long positions just before SEC approval could amplify volatility.
Regulatory Progress: Is an ETH ETF Inevitable?
The report highlights ongoing dialogue between U.S. regulators and nine different fund providers currently navigating various stages of the ETF application process. Given that the SEC ultimately approved multiple Bitcoin ETFs after years of hesitation, Citi believes a similar trajectory for Ethereum is plausible—and possibly likely.
The approval of Bitcoin ETFs set a regulatory precedent, making it harder for the SEC to reject Ethereum without clear justification. While Ethereum’s programmable nature and staking mechanism introduce complexity, recent upgrades like Pectra have enhanced its ability to support efficient staking yield generation within ETF frameworks—without sacrificing liquidity.
This technical readiness strengthens the case for approval and aligns with growing institutional demand.
Long-Term Outlook: Macro Forces and Market Correlation
Citi analysts emphasize that both Bitcoin and Ethereum remain highly correlated over the long term, driven largely by macroeconomic factors such as interest rates, inflation trends, and risk appetite in traditional markets.
“We expect major cryptocurrencies to remain highly correlated and continue to be driven by macro forces in the long run,” Citi concluded.
That said, their underlying utilities differ significantly:
- Bitcoin serves primarily as a store of value.
- Ethereum functions as a foundational platform for DeFi, NFTs, and Web3 innovation.
As such, developments in on-chain activity, network upgrades, and real-world adoption will play an increasingly important role in shaping Ethereum’s unique value proposition beyond mere market sentiment.
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Frequently Asked Questions (FAQ)
Q: What does “buy the rumor, sell the news” mean in crypto markets?
A: It refers to a trading pattern where investors buy an asset in anticipation of positive news (like an ETF approval), then sell once the news is confirmed—often leading to a price drop despite the good outcome.
Q: Has the SEC approved any Ethereum ETFs yet?
A: As of mid-2025, no spot Ethereum ETF has been officially approved. However, multiple applications are under review, and regulatory momentum appears to be building.
Q: How could ETH ETF approval impact its price?
A: Based on Bitcoin’s precedent and adjusted inflow estimates, Citi projects a potential 23%-28% price increase if ETH ETFs attract $3.8–$4.5 billion in net inflows.
Q: Is Ethereum considered a security by the SEC?
A: The classification remains unclear. While some SEC officials have suggested Ethereum might qualify as a security, others treat it more like a commodity—especially after the network transitioned to proof-of-stake.
Q: Can I invest in Ethereum through existing financial products?
A: Not directly via U.S.-listed spot ETFs yet. However, investors can access ETH through futures-based ETFs, trusts like ETHE, or directly via regulated exchanges.
Q: What role does staking play in Ethereum ETFs?
A: Recent upgrades allow ETH ETFs to offer exposure to staking rewards efficiently while maintaining high liquidity—making them more attractive to institutional investors.
While the 20% rally reflects strong bullish sentiment, investors should remain mindful of timing and positioning risks. With regulatory clarity on the horizon and macro conditions evolving, Ethereum stands at a pivotal moment—not just as a speculative asset, but as a cornerstone of the next-generation internet economy.
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