Following the launch of the Spot Ethereum ETFs, there has been unexpected turbulence in the ETH price, indicating that the event may have been a ‘sell the news’ situation. The second-largest cryptocurrency by market cap has witnessed a 10% decline since the trading of Spot Ethereum ETFs began on July 23. This decline has raised concerns about the future trajectory of ETH price.
Markus Thielen, Head of Research at Matrixport, highlighted several factors contributing to the decline in ETH price post the Spot Ethereum ETFs launch. One significant factor is the outflows from the Grayscale Ethereum fund, which holds a substantial amount of ETH. Competitors offering lower management fees have drawn investors away from Grayscale. On the first day alone, $481 million flowed out of the fund, exerting downward pressure on the ETH price.
In addition to the Grayscale outflows, the Mt. Gox distributions coinciding with the ETFs launch added further selling pressure to the crypto market. This confluence of events has dampened the initially optimistic sentiment surrounding the Spot Ethereum ETFs. The market seems to be reacting similarly to how it did during the launch of Spot Bitcoin ETFs, with price declines following significant outflows.
Thielen also employed technical analysis to assess the current state of the ETH price. He utilized the daily stochastics indicator, which had reached a high score of 92% before the ETFs launch. A score above 90% typically indicates overbought conditions, signaling a potential price correction. The indicator has since declined to 87%, suggesting that further downside may be expected in the ETH price.
Considering the recent market conditions, including Mt. Gox distributions, the US earnings season, and historically weak seasonals in August and September, Thielen advised maintaining a cautious stance on Ethereum. He suggested that short positions on ETH may be viable in the near term, given the potential headwinds facing the cryptocurrency.
The launch of Spot Ethereum ETFs has not had the anticipated positive impact on the ETH price. Instead, the market has reacted negatively to the outflows from the Grayscale fund and other external factors. Moving forward, investors and traders should remain watchful of the evolving market dynamics to make informed decisions regarding their ETH holdings.
