The week of May 17–24, 2024, marked a pivotal moment in the cryptocurrency markets, driven by anticipation and reaction to one of the most significant regulatory developments in recent memory — the potential approval of a spot Ethereum (ETH) ETF. Market sentiment surged, prices swung dramatically, and derivatives data revealed intense trader positioning shifts. This report analyzes the key movements, underlying metrics, and broader implications for investors navigating this evolving landscape.
Ethereum Jumps 18% on ETF Approval Odds
On May 20, 2024, news broke that the U.S. Securities and Exchange Commission (SEC) had requested exchanges accelerate their filings for spot Ethereum ETFs under Form 19b-4. Bloomberg Intelligence analysts responded by raising the probability of approval to 75%, citing growing regulatory clarity and institutional readiness.
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This development triggered an immediate rally in ETH’s price, which surged 18% within hours. The bullish momentum was fueled by aggressive long positioning, leading to over $75 million in short liquidations that day alone — a clear sign of bearish traders being forced out of their positions.
Despite the optimism, when the ETF was officially approved on May 23, Ethereum’s price did not sustain its peak. After reaching an intraday high of $3,950**, ETH rapidly corrected, dropping to a low of **$3,524 — a swing of more than 10%. This reversal caught many longs off guard, resulting in $88.16 million in long liquidations, surpassing the earlier short squeeze in magnitude.
However, the market quickly stabilized. By the end of the week, ETH had rebounded to $3,800, suggesting strong underlying demand and confidence in Ethereum’s long-term fundamentals.
Market Metrics Reveal Volatility and Positioning Shifts
To understand the full picture behind price action, we must examine key derivatives and on-chain indicators that reflect real-time trader behavior.
Price, Volume, and Open Interest Trends
Bitcoin (BTC) also reacted positively to the broader bullish sentiment surrounding ETH’s ETF progress. Both BTC and ETH saw price increases on May 20, aligning with rising market optimism. However, their volume and open interest patterns diverged:
- Bitcoin: Experienced peak trading volume during the initial rally on May 20 but showed relatively stable open interest throughout the week. This suggests that while spot and short-term traders were active, there was no major buildup in leveraged futures positions.
- Ethereum: Saw a substantial increase in open interest, particularly as the approval date approached. This indicates growing participation from leveraged traders betting on continued upside — a factor that amplified both the rally and the subsequent correction.
Implied Volatility and Funding Rates
- Implied volatility (IV) for Bitcoin declined slightly during the period, reflecting increased market confidence and reduced fear of black swan events.
- In contrast, Ethereum’s IV rose sharply — a typical pattern ahead of major catalysts like regulatory decisions. High IV signals elevated uncertainty and options premium demand.
- Funding rates across major exchanges moved from neutral or slightly negative territory back into positive territory, indicating renewed bullish sentiment in perpetual futures markets.
Market Breadth and Sentiment Recovery
Market breadth — a measure of how broadly participation is distributed across assets — showed signs of improvement. While large-cap cryptos like BTC and ETH led the move, mid-tier altcoins also began showing strength, suggesting a broader recovery in risk appetite.
Why Did Ethereum Drop After ETF Approval?
A common question among investors is: Why did ETH fall after such a highly anticipated positive event?
This phenomenon is best explained by the concept of “buy the rumor, sell the news.” Markets often price in expected outcomes well before they occur. In this case:
- The 18% rally ahead of approval reflected the market’s consensus that an ETF was likely.
- Once approval became reality, traders who had bought in anticipation exited their positions to lock in profits.
- Leverage-heavy long positions exacerbated the downward move when stop-losses were triggered.
This type of post-event correction is not unique to crypto — it's observed across traditional financial markets as well.
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Frequently Asked Questions (FAQ)
What caused Ethereum’s 18% price surge in May 2024?
The surge was primarily driven by news that the SEC requested expedited filings for spot Ethereum ETFs. Bloomberg analysts raised the approval odds to 75%, fueling investor optimism and triggering a wave of buying pressure.
Why did Ethereum drop after the ETF was approved?
Despite the positive news, ETH experienced a classic “sell the news” reaction. Traders who had positioned for approval took profits, and leveraged long positions were liquidated as price volatility spiked post-decision.
How did Bitcoin react to the Ethereum ETF news?
Bitcoin also rose during the week, benefiting from overall improved market sentiment. However, BTC showed less volatility compared to ETH, with stable open interest and declining implied volatility — signaling more mature market behavior.
What does funding rate indicate in crypto markets?
Funding rates reflect the cost of holding perpetual futures positions. Positive rates suggest bullish sentiment (longs pay shorts), while negative rates indicate bearishness. A rebound in funding rates signals renewed leverage-driven buying interest.
What is open interest, and why did it rise for Ethereum?
Open interest represents the total number of outstanding derivative contracts. A rise in open interest — as seen with ETH — indicates new money entering the market, often signaling strong conviction in future price movement.
Is the Ethereum ETF approval a bullish long-term signal?
Yes. Similar to Bitcoin’s ETF approval earlier in 2024, a spot ETH ETF opens the door for institutional investment through regulated channels. While short-term price reactions may be volatile, the long-term impact is expected to be strongly positive due to increased adoption and liquidity.
Looking Ahead: Fed Meeting and Macro Outlook
With the next Federal Reserve interest rate decision scheduled for June 13, 2024, markets are entering a quiet phase where macroeconomic factors will regain prominence. As of now, approximately 20 days remain before the meeting.
Historically, periods leading up to Fed decisions see reduced risk appetite, especially if inflation data remains sticky. Traders should monitor:
- U.S. CPI and PPI reports
- Treasury yields
- Dollar strength
- On-chain stablecoin inflows
These factors will influence whether the current bullish momentum sustains or gives way to consolidation.
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Conclusion
The week of May 17–24, 2024, underscored the growing maturity — and complexity — of crypto markets. The Ethereum ETF saga demonstrated how quickly sentiment can shift based on regulatory developments, and how derivatives markets amplify both rallies and corrections.
For investors, understanding these dynamics — from liquidation levels to funding rates and volatility trends — is essential for making informed decisions in fast-moving environments. While short-term noise may dominate headlines, structural developments like ETF approvals continue to lay the foundation for long-term growth in digital asset adoption.