The US market debut of Ethereum exchange-traded funds (ETFs) this week heralded substantial market shifts. This is because the Grayscale Ethereum Trust (ETHE) has shed over $800 million since its inception.
The development showcases the inherent volatility and complex outlook of crypto ETF launch events.
Analysts Remain Optimistic for Ethereum Recovery Despite Sell-Offs
On Tuesday, as Ethereum ETFs entered the market, initial excitement quickly waned. The market recorded a net outflow of $26.7 million from these ETFs within two days, and Ethereum’s price plummeted. Grayscale’s Ethereum Trust experienced the most dramatic outflow, losing $484.1 million on its first day and $326.9 million on the second day.
Despite the influx of $74.5 million into Fidelity’s Ethereum ETF and $45.9 million into Grayscale’s Ethereum Mini Trust on Wednesday, the overall sentiment remained bearish. The price of Ethereum reflected this trend, falling 8% in the last 24 hours to a trading value of $3,167.
Read more: How to Invest in Ethereum ETFs?
Several factors contribute to this downturn. Notably, the launch of the Ethereum ETF coincided with the distribution of Bitcoin from the defunct Mt. Gox, amplifying sell-off pressures.
Additionally, the US tech earnings season has started weakly, with significant companies like Alphabet and Tesla experiencing sell-offs after their earnings reports. According to 10X Research, this broader market uncertainty is also impacting crypto investments.
Moreover, lack of marketing efforts is believed to be another factor, affecting Ethereum’s value.
“We have not heard any marketing campaigns from Ethereum ETF issuers. Isn’t it bizarre that Vitalik is not on Bloomberg or CNBC explaining what Ethereum is? Does he even care? Have you ever seen this during an IPO when the company is not running some form of awareness? Interest among crypto investors is already shallow, as many focus on Solana instead of Ethereum,” Markus Thielen from 10X Research said.
Historically, cryptocurrency launches often trigger initial enthusiasm, followed by quick profit-taking, a phenomenon known as a ‘sell-the-news’ event. This pattern was evident in January 2024 with the introduction of spot Bitcoin ETFs, suggesting a recurring trend in crypto markets.
“In the weeks following the trade of the Ethereum spot ETFs, ETH prices are anticipated to remain volatile. This volatility is largely attributed to the conversion of the $11 billion Grayscale Ethereum Trust (ETHE) into a spot ETF, which is expected to cause a short-term net outflow of funds,” Edward Wu, Analyst at BloFin Research & Options told BeInCrypto.
However, some analysts remain optimistic about Ethereum’s recovery, paralleling Bitcoin’s post-ETF performance.
“If the markets copy the price action of the Bitcoin ETF, then it’s likely that we’ll have a slight sell-off due to the outflows of the Grayscale trust. One-two weeks for downward momentum, before the real surge of Ethereum towards a new all-time high,” Michael van de Poppe said.
Read more: Ethereum (ETH) Price Prediction 2024/2025/2030
In related news, Hong Kong is exploring the inclusion of staking in its spot Ethereum ETFs to stand out from their US counterparts. This strategy could provide a temporary edge in the competitive ETF market despite higher management fees than those in the US.
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