Ethereum Price Tanks After Spot ETF Launch.
Just a day after the launch of the US spot Ethereum ETF, Ethereum’s price has dropped significantly. The price fell more than 8%, hitting as low as $3,150. This sharp decline caused many investors to lose money, leading to substantial liquidations of long positions in Ethereum.
Ethereum Liquidations Surge
Data from Coinglass shows that Ethereum liquidations have surged past those of Bitcoin in the last day. Ethereum liquidations have reached an astounding $97.8 million, compared to Bitcoin’s $80.9 million. This is a significant difference, showing the impact of the ETF launch on Ethereum.
Long Positions Heavily Liquidated
Breaking down the Ethereum liquidations, a large portion, $94.4 million, were long positions. Only $43.3 million targeted short positions. Most of these liquidations happened within the past four hours, matching the intense selling pressure on Ethereum.
Sell-the-News Event?
Some analysts believe that the approval of the spot Ethereum ETF might have triggered a “sell-the-news” event. This is similar to what happened with Bitcoin in January this year. In July, Ethereum’s price reached $3,500. Now, investors seem to be cashing out due to the excitement around the ETF launch.
ETH Whale Activity and Market Pressures
On-chain data reveals that a big Ethereum whale sold a large amount of coins on July 24th. According to Spot on Chain, this whale deposited 10,000 ETH on Kraken, worth $34.2 million, just before the price drop. The whale made a profit of $173 million from the sale. This whale had bought these coins at $1,580 in September 2022 from Coinbase.
Moreover, 10xResearch suggests that ongoing distributions from Mt. Gox are putting extra pressure on the broader cryptocurrency market. They think that Ethereum, due to stagnant or declining fundamentals, might be the weakest link in this situation.
Recovery on the Horizon?
Crypto analyst Michael van de Poppe remains optimistic. He suggests that Ethereum might see a reversal amidst strong outflows from the Grayscale Ethereum Trust. He predicts a two-week downward trend for ETH before it starts to rally towards new highs. The price may find support around $3,150 before bouncing back.
Mixed Performance in Spot Ethereum ETFs
While spot Ethereum ETFs started strong with nearly $107 million in net inflows, data from Farside Investors shows a decline on the second day. Investors withdrew about $133 million.
Fidelity’s Ethereum Fund (FETH) led the pack, attracting $74.5 million in net inflows. It surpassed BlackRock’s iShares Ethereum Trust (ETHA), which gathered $17.5 million on Wednesday.
Grayscale’s Ethereum Trust Outflows
In contrast to the success of other ETFs, Grayscale’s Ethereum Trust (ETHE) saw significant outflows. These outflows totaled nearly $327 million, bringing the cumulative outflow since launch to $811 million. As a result, ETHE’s assets under management have dropped to $8.3 billion from $9 billion before the launch.
Other Ethereum ETFs See Positive Inflows
However, there were some bright spots. Grayscale’s Ethereum Mini Trust (ETH) recorded about $46 million in inflows, making it one of the most affordable spot Ethereum products in the US market. Similarly, Bitwise’s Ethereum ETF (ETHW) and VanEck’s Ethereum ETF (ETHV) reported net inflows of more than $29 million and $20 million, respectively. Other positive performers included Franklin’s EZET and Invesco/Galaxy’s QETH.
Market Downturn
The broader market also experienced a decline. Bitcoin’s price dropped 2.52% to $64,200, and the overall crypto market fell nearly 4%. This slump coincided with a decline in the US stock market, with the Nasdaq Composite and S&P 500 experiencing their worst days since October and December 2022, respectively.
Spot Ethereum ETFs Post $113M of Outflows on Second Day of Launch
The “newborn” eight ETFs didn’t manage to beat the $327 million of outflows from Grayscale’s recently converted Ethereum Trust.
Second-Day Performance of Ether ETFs
United States-based spot Ether exchange-traded funds (ETFs) returned net outflows of $113.3 million on their second trading day. This was mainly due to heavy losses from Grayscale’s Ethereum Trust.
Seven of the eight “newborn” spot Ether ETFs posted net inflows on day two of trading. The Fidelity Ethereum Fund (FETH) and the Bitwise Ethereum ETF (BITW) led with the largest net inflows, posting $74.5 million and $29.6 million, respectively.
BlackRock’s iShares Ethereum Trust (ETHA), which had the most robust inflows on July 23, only collected $17.4 million from investors on July 24.
Heavy Selling from Grayscale’s Ethereum Trust
The new ETFs were weighed down by another heavy day of selling from the recently converted Grayscale Ethereum Trust (ETHE), which saw $326.9 million in outflows.
Impact of Grayscale’s Ethereum Trust Conversion
Launched by Grayscale in 2017, ETHE allowed institutional investors to purchase ETH. However, it imposed a six-month lock-up period on all investments. Upon its conversion to a spot Ether fund on July 22, investors have been able to sell their ETH more easily.
In the two days following its conversion, ETHE has seen $811 million in outflows. This means that existing ETHE investors have now sold off just over 9% of the fund’s holdings.
Related: Ethereum ETFs Start Strong but Lag Bitcoin ETF Launch
The recent Ether ETF performance isn’t unprecedented. Spot Bitcoin ETFs posted cumulative net outflows for six out of 10 of their first trading days. Many blame outflows from the Grayscale Bitcoin Trust ETF.
Ethereum Price Today
ETH is trading at $3,172 at the time of publication, down over 6.8% in the last 24 hours and 7.4% on the week, according to TradingView data.
Ether’s price drop happened during a wider sell-off in the equities market. The S&P 500 closed down 2.3% on July 24.
ETH’s Price Sensitivity to ETF Inflows
Notably, ETH fell more sharply compared to Bitcoin, which only dropped 2.6%. This matches Kaiko analyst Will Cai’s prediction that ETH’s price could be very “sensitive” to inflows following the launch of the ETFs.
Grayscale’s ETHE Shed $484.4 Million on First Trading Day
Grayscale’s ETHE lost $484.4 million on its first day of trading as a spot Ether ETF. However, strong inflows across the other eight products pushed cumulative net inflows to $106.6 million.
Ethereum’s Future Outlook
The future of Ethereum’s price remains uncertain. While some analysts predict a short-term dip, others see potential for a strong recovery. Investors should keep an eye on market trends, ETF performance, and whale activity to make informed decisions.
Conclusion
The launch of the US spot Ethereum ETF has significantly impacted Ethereum’s price and the broader crypto market. While there are mixed performances among different ETFs, the overall trend shows a substantial outflow from Grayscale’s Ethereum Trust. However, some analysts remain optimistic about Ethereum’s recovery. Investors need to stay informed and cautious as the market continues to evolve.
