Ether (ETH) price surged 25% between May 20 and May 21, reaching a nine-week high of $3,840. However, the altcoin encountered resistance, despite growing confidence in the approval of a U.S. spot Ether exchange-traded fund (ETF) by the May 23 deadline. This is when regulators will decide on the application from asset manager VanEck. Traders are now pondering if the stabilization around $3,750 suggests that the Ether ETF approval is already factored into the price.

Pending SEC decision on spot ETH ETF remains in play

Analysts have increased their approval expectations after the U.S. Securities and Exchange Commission (SEC) reportedly reached out to the NYSE and Nasdaq to update their 19b-4 filings for the proposed spot Ether ETFs. Crypto lawyer Jake Chervinsky pointed out that this sudden interest from the regulator likely stems from political motives, as U.S. President Joe Biden may wish to appeal to cryptocurrency supporters.

However, there is still no official word from the SEC, which plans to vote on the issue with a panel of five commissioners. Two of them are notably pro-crypto: Hester Peirce and Mark Uyeda. On the other hand, Caroline Crenshaw is known as the SEC's most vocal critic of the cryptocurrency sector, especially for its inadequate regulation and the risks of fraud and manipulation.

Investors may be assessing the potential impact on Ether's price based on Bitcoin’s (BTC) trajectory following its U.S. spot ETF approval in January. Bitcoin saw a 35% increase in the 50 days after the announcement, climbing from $46,356 to $62,416 by March 1. It's arguable whether the demand for Ether ETFs will reach the $7.37 billion inflow that Bitcoin experienced in its first 50 days, especially given the intense competition from Grayscale’s $28.7 billion GBTC fund.

Considering analysts give a 75% probability of Ether’s ETF being approved, the recent 25% increase in ETH price aligns with Bitcoin’s trend post-ETF approval. This doesn't mean Ether’s price is limited to $3,840, but it suggests that the approval likelihood aligns with market expectations. Similarly, Bitcoin’s rally didn’t stop at a 35% gain, as it reached a new all-time high of $73,750 two weeks later. However, as time passes from such events, external factors increasingly influence the market.

For instance, the S&P 500 index hit a record high on March 12, and WTI prices finally broke above $80 on March 14 after four months. Bitcoin’s U.S. spot ETF approval coincided with a particularly favorable period for risk-on assets. While it’s uncertain what Bitcoin’s performance would have been under different market conditions, assuming a similar trajectory for Ether would be simplistic.

Related: Strong Bitcoin ETF inflows boost BTC stability, says Bitfinex

Ether derivatives metrics are far removed from euphoria

To gauge how professional traders are positioned, it's useful to examine the Ether futures market. Normally, ETH futures should exhibit an annualized premium of 5% to 10%, a market condition known as contango, which is typical in financial markets.

Data suggests that before May 20, major investors and market makers were not confident in Ether's performance, at least not enough to justify an annualized premium of over 10% for a leveraged long position. The jump to a 15% premium shows a moderate risk appetite among bulls, but this is still far from the 20% to 27% range seen in March.

The metrics from derivatives suggest that Ether traders are not excessively optimistic or fully pricing in the approval odds of the U.S. spot Ether ETF. For ETH bears, this greatly reduces the potential negative impact of a denial, as there is no excessive leverage use among buyers. Ultimately, Ether's current price does not reflect full anticipation of an approval, indicating potential for further gains.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.