Ethereum Dives Briefly, As JP Morgan Sees Spot ETH ETF Approval

Ethereum ( ETH ) experienced a sharp price decline on Friday, following data revealing its underperformance compared to Bitcoin ( BTC ). Despite recent Wells notices to crypto firms, JP Morgan analysts predict spot ETH ETFs will likely be approved. The SEC's recent Wells notices to Robinhood Crypto, Consensys, and Uniswap do not pose a challenge to the agency's potential approval of a spot ETH ETF. Markets do not expect an approval by this month as implied by the significant discount to NAV by the Grayscale Ethereum Trust ETHE.

JP Morgan analysts also suggested that the SEC may face a legal challenge and eventually lose if it denies applications for spot ETH ETFs, considering the agency already approved futures-based ETH ETFs. General Partner at Van Buren Capital Scott Johnsson expressed an opposite view, stating that he would be surprised if a legal battle ensued following a potential spot ETH ETF denial. Grayscale hinted that it won't take the SEC to court this time after withdrawing a "key tool" — probably its application for futures ETH ETF.

Ethereum Layer 2s are about to set a new all-time high in terms of active addresses, with more than 5.2 million monthly active users as of May 5. This surge in user growth coincides with declining gas fees for Ethereum Layer 2s, which have been reduced more than tenfold since the Dencun upgrade in March.

Glassnode data shows that Ethereum ( ETH ) has underperformed in the last two years when compared to Bitcoin, with a low ETH/BTC ratio and ETH drawdown in this cycle (-44%), doubling Bitcoin's (-21%). The Net Unrealized Profit/Loss (NUPL) of Bitcoin crossed 0.5 and entered the euphoria phase three months before the equivalent metric for Ethereum.

Ethereum ( ETH ) is trading with a weak Relative Strength Index (RSI) of 38.41 which is slightly oversold. The asset's daily price chart shows that Ethereum ( ETH ) is in a "Falling Wedge" pattern but a trend reversal is looming in the near to long term.