Enthusiasm in the crypto world is dissipating almost as quickly as it surged in the aftermath of a court ruling that appears to pave the way for a long-sought US exchange-traded fund that invests directly in Bitcoin.

The original cryptocurrency dropped as much as 1.9% to $27,056, after jumping more than 6% on Tuesday when an appeals court overturned a SEC decision to block Grayscale Investments LLC’s spot ETF proposal. Shares of Grayscale’s Bitcoin Trust fell around 4.5%. The stock had surged 17% after the ruling.

A Bitcoin ETF has been touted by advocates as a conduit into crypto for mainstream investors for almost a decade. After years of application rejections by the SEC, optimism jumped in June with ETF heavyweight BlackRock filed a proposal. Bitcoin soon climbed to the highest price in a year. It tumbled two weeks ago, fueled in part by the prospect of prolonged high interest rates and exacerbated by thin crypto trading. Bitcoin trades at less than half its record high reached in late 2021.

“A lot of the interest in crypto has left the ecosystem,” said Leo Mizuhara, founder and CEO of decentralized-finance institutional asset management platform Hashnote. “Even people who had been in the ecosystem for a long time are starting to get pessimistic.”

Waning interest may best be seen in perpetual futures, one of the most popular derivatives contracts in crypto markets. Open interest, or the total number of outstanding contracts, for Bitcoin perpetual swaps denominated in the cryptocurrency is little changed since the court ruling, according to data compiled by Kaiko.

“In the wake of the spot ETF applications, a lot of speculative length built up,” said Spencer Hallarn, a derivatives trader at crypto investment firm GSR. “After a long consolidation between $29,000 and $31,000, when the price began to breakdown out of this range, a wave of cascading liquidations was set off that cleansed a lot of this levered long positioning from the market.”

Even so, the Bitcoin options market indicates that some traders are positioning for higher prices since Grayscale’s victory, according to Fredrick Collins, CEO and founder of crypto data platform Velo Data. The relative expensiveness of puts versus calls hit a one-year low yesterday, he said.

Most of the option buying was for short-term calls, meaning traders are looking for higher prices in the near-term, according to Darius Sit, founder and chief investment officer of crypto trading firm QCP Capital.

Grayscale Investments Chief Executive Officer Michael Sonnenshein noted Wednesday that the firm isn’t sure yet whether the firm needs to refile an application with the SEC.

“We will have to see upon the final operational procedures that come through that final mandate that the court will issue,” Sonnenshein said on Bloomberg Television. “We don’t know what the final opinion will say until we reach the end of that period,” which is 45 days from the ruling, he said.

More potential developments may come by the end of the week. The SEC is expected to respond to filings from Bitwise, BlackRock, VanEck, WisdomTree and Invesco right before the Labor-Day weekend, according to Bloomberg Intelligence. Regulators can reject, approve or delay. Bitwise’s application is set for consideration by Friday, with the others due the following day, making it likely the SEC will weigh in before the weekend.

“In order for the market to sustain a meaningful rally, we’ll need more clarity on the spot Bitcoin ETF timeline and a gauge of subsequent demand,” said Kyle Doane, a trader at Arca.

--With assistance from Olga Kharif.