Following weeks of fine-tuning of registration statements, several spot ethereum ETFs have been approved and will begin trading on Tuesday. The price of Ether has not seen any significant changes so far.
Kaiko suggests that in the coming days, the crypto asset will likely be “sensitive” to spot ETF inflows, especially given tepid demand for futures products in late 2023. Traders also appear to be bracing for mixed outcomes.
The market is preparing for volatility
In a recent eth-etf-be-sell-the-news-event” target=”_blank”>report This week, Kaiko’s head of indices, Will Cai, noted that futures-based ethereum ETFs launched in the U.S. late last year faced disappointing demand. Now, the focus is on the launch of spot ethereum ETFs, with expectations of rapid asset accumulation. While it may take several months to fully assess demand, Cai mentioned that Ether’s price could be particularly “sensitive to early-day inflow figures.”
After a brief rally in May following the passage of Rule 19b-4, Ether has been trending lower. It had previously tested levels around $4,000 in March; that was when bitcoin hit all-time highs.
Over the weekend, Kaiko found that Ether’s implied volatility increased, with the nearest contract expiring on July 26 jumping from 59% to 67%. This increase suggests that traders are less confident about the ETF launch as they are paying higher premiums to hedge their bets.
It is worth noting that this increase occurred before President Joe Biden withdrew from the election, indicating that the increase is likely linked to ETF launches rather than political factors. Meanwhile, implied volatility for contracts expiring in August remains above 65% and, as of September 27, stands at 70%.
Expectations for selling news increase
The current state of the market suggests uncertainty and heightened expectations, which could imply that traders are preparing for various outcomes, including the possibility of a “sell the news” event, as Kaiko hinted at.
This narrative was also supported by QCP Capital's latest report. mailwhich highlighted that the lack of a positive market reaction is in itself a negative signal. The cryptocurrency trading platform also added that this sentiment indicates that traders are cautious and waiting to see who will be the first to “sell the news.” It is this cautious stance that implies a lack of confidence, where the anticipation of a sell-off following the news is creating a tense atmosphere.
Earlier this week, pseudonymous cryptocurrency analyst ‘Kaleo’ predicted a “high probability” of a pullback following the spot ETF’s debut. He even predicted that the altcoin could potentially fall below $2,800 before price discovery.
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