On a day marked by the launch of the long-awaited ethereum (eth) exchange-traded fund (ETF) in the United States, the market response has been unexpectedly subdued. Analysts at Singapore-based crypto asset trading firm QCP Capital have x.com/QCPgroup/status/1815705038238712171″ target=”_blank” rel=”nofollow”>shed light on the reasons behind this muted reaction, attributing the situation to previous market behavior and other market news in general.
Why ethereum Price Isn't Skyrocketing
In its note to investors, QCP Capital notes that the market may be following a “buy the hype, sell the news” pattern, similar to the US spot bitcoin ETF launch scenario. When the spot bitcoin ETF debuted on January 11 this year, bitcoin prices surged ahead of the launch but then dropped to $38,000, recording a -21% drop in the first 12 days after the launch.
This price action was primarily driven by outflows from Grayscale’s bitcoin ETF, which was converted from the GBTC Trust and opened up the possibility for investors to cash out their holdings for the first time in years. A similar scenario could be looming for eth, though there is one key difference with the launch of Grayscale’s “Mini ETF.”
It is worth recalling that bitcoin subsequently reached new all-time highs within two months. Therefore, QCP suggests that investors remain cautious and wait for further developments before making any major moves on the eth market.
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Furthermore, the overall market sentiment, which is heavily influenced by bitcoin movements, could also play a crucial role. In particular, bitcoin transfers by the US government and Mt. Gox have created a domino effect that is affecting the dynamics of the cryptocurrency market as a whole.
This morning, the US government transferred 58,742 btc to Coinbase, while still holding 213,239 btc worth around $14.2 billion. At the same time, Mt. Gox moved around 47,600 btc to various wallets, including 5,110 btc ($340.1 million) to Bitstamp. These large-scale movements may contribute to the cautious market stance.
While ethereum spot prices remain stable, the options market is showing notable activity. QCP observed that volatility on July 26 saw an impressive spike of 8 volatilities, and risk reversal (RR) dropped by 3 volatilities. This indicates increased caution against potential downward movements. The divergence between spot and options markets indicates that traders could be preparing for further price declines in the near term.
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“The options market seems to be expecting further bearish movement in the near term, exacerbated by the news from the US government and Mt Gox,” QCP commented.
Given the current conditions, QCP Capital suggests that ethereum prices may remain subdued in the near term. The firm highlights potential btc selling pressures from the US government and Mt Gox as key factors that could indirectly prevent eth prices from rising.
Furthermore, since the impact of the eth Spot ETF has not yet been reflected in the market, traders might be waiting for more momentum to build, possibly in the run-up to the US elections. QCP’s investor note concludes: “Since the eth Spot ETF is likely to not impact prices early on, coupled with potential selling pressure from the US government and Mt Gox, prices may remain subdued until further momentum builds ahead of the elections.”
At the time of writing, eth was trading at $3,513, up 0.5% over the past 24 hours.
Featured image created with DALL·E, chart from TradingView.com
