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Bitfinex analysts said that ethereum (Ethnicity) The 40% drop following the launch of US spot eth exchange-traded funds (ETFs) is an expected “sell the news” reaction.
According to the latest edition of the “Bitfinex Alpha” report, ethereum ETFs face substantial challenges as significant outflows continue to weigh heavily on Ether’s performance, exacerbating the asset’s underperformance relative to bitcoin.
The report highlighted negative net flows from ethereum spot ETFs (currently with $420 million in outflows) as the primary force driving eth’s price decline in recent weeks.
He added that heavy selling by market makers such as Jump Trading and Wintermute, coupled with a macroeconomic shakeup stemming from recent rate hikes in Japan, have further contributed to the downtrend.
ethereum Weakness
According to the report, the ethereum ETF market has experienced significant fluctuations in fund flows, contributing to the observed weakness in the price of Ether compared to the broader cryptocurrency market.
On August 5, the eth/btc pair hit its lowest level in over 1,200 days, falling to 0.0367, marking a significant decline from its peak in February 2021.
The report indicates that the eth/btc pair has been trending lower since the ethereum merge in September 2022, and this recent move further deepens concerns about ethereum’s relative weakness.
Bitfinex analysts believe that a key factor contributing to this underperformance is the impact of bitcoin ETFs, which have successfully directed passive flows and increased demand towards btc. This dynamic has left ethereum ETFs struggling to attract the same level of investor interest, even as they try to establish themselves in the market.
The persistent weakness of the eth/btc pair suggests that there are deeper market forces at play beyond the mere availability of institutional investment products.
Performance of divergent ETFs
ethereum ETFs have shown some signs of recovery, particularly with From BlackRock iShares ethereum Trust (ETHA), which saw over $100 million in inflows on two separate occasions in late July and early August. As of last week, cumulative ETHA inflows had approached $977 million, indicating some resilience in the face of broader market challenges.
However, Grayscale ETHE has seen significant capital outflows, totaling over $2.4 billion since its conversion into an ETF. This significant outflow reflects a cautious (or possibly negative) sentiment among institutional investors towards this specific ETF.
According to the report, ETHE’s difficulty can be attributed to its price, which was at a 20% discount to the underlying eth price even weeks after it was converted. This discount, driven by arbitrage traders taking profits, has persisted, leading to continued outflows, although the pace has slowed recently.
It is worth noting that the rate of HE SAID The outflows have been faster than those of Grayscale bitcoin Trust (GBTC). On the 20th trading day after launch, ETHE assets under management stood at 70% compared to pre-launch figures, while GBTC stood at 76.3% during the same period.
The current trend raises questions about the effectiveness of ethereum ETFs in balancing market trends between eth and btc. The continued underperformance of eth versus btc suggests that there are deeper market forces at play beyond the mere availability of institutional investment products.
