The recent launch of Spot Ethereum ETFs has had an unexpected impact on the price of ETH, leading to a continued struggle for the second-largest cryptocurrency by market cap. Despite initial excitement in the market, investors have witnessed a decline of around 10% in the value of ETH since the trading of Spot Ethereum ETFs began. This phenomenon has led to speculation that the launch of the ETFs may have been a ‘sell the news’ event, causing disappointment among traders expecting a positive price movement.
According to Markus Thielen, the Head of Research at Matrixport, there are multiple reasons contributing to the decline in the ETH price post the launch of Spot Ethereum ETFs. One significant factor is the outflows from the Grayscale Ethereum fund, which holds a substantial amount of ETH. The management fees of the fund have been a concern for investors, especially when compared to competitors offering lower fees. The outflows from the Grayscale ETH fund totaled $481 million on the first day and $326 million on the following day, creating selling pressure on the market.
Another factor influencing the ETH price decline is the Mt. Gox distributions coinciding with the launch of the Spot Ethereum ETFs. This event has added extra selling pressure on the crypto market, further exacerbating the negative trend in ETH price. Similar to the reaction of the Bitcoin price to the launch of Bitcoin ETFs, ETH price has responded unfavorably to these developments, falling below $4,200.
Markus Thielen also suggests that the ETH price may have reached its peak based on the daily stochastics indicator. A score of 92% in the days leading up to the Spot Ethereum ETFs launch indicates that the cryptocurrency was in an overbought state. Typically, a score above 90% signals a bearish trend as investors start offloading their holdings, causing a decline in price. With a 5% decrease in the indicator score, Thielen predicts that there is still room for the ETH price to drop further before stabilizing.
Considering the recent rally in ETH price, along with potential challenges from Mt. Gox distributions, the US earnings season, and unfavorable seasonals in August and September, Thielen advises caution when trading Ethereum. He suggests that shorting ETH may be a viable option given the current market conditions and the bearish indicators pointing towards a continued price decline. Investors are advised to monitor the developments closely and adjust their trading strategies accordingly.
Leave a Reply