Following the launch of ethereum Spot ETFs, the price of eth has unexpectedly continued to struggle, proving that the launch of Spot ETFs was a “sell the news” event. So far, the second-largest cryptocurrency by market cap has lost around 10% of its value since ethereum Spot ETFs trading began on Tuesday, July 23, and could see a further decline from here, according to an analysis by Matrixport.
ethereum Spot ETFs Trigger Sell-Off
Following the launch of the ethereum spot ETFs, there was a lot of excitement in the market, especially around the fact that investors could now gain exposure to eth without having to directly purchase the underlying token. However, this excitement has been short-lived, as days after the launch, the price of eth continues to struggle.
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In a report published on Thursday, Markus Thielen, research director at Matrixport, outlined a number of reasons why the price of eth was declining. As Thielen explains, while inflows exceeded $100 million on the first day, Grayscale’s ethereum fund had been experiencing outflows.
As with the launch of Spot bitcoin ETFs, Grayscale’s eth fund, which holds around $9 billion worth of eth, started seeing outflows. This is due to the fact that Grayscale’s management fees remain high, with competitors offering fees as low as 0.19%. On the first day alone, $481 million left the fund, and the next day, $326 million.
On top of this, Mt. Gox distributions began around the same time as the launch of the ethereum spot ETFs, so this also put additional selling pressure on the cryptocurrency market. Much like the bitcoin price did with the bitcoin spot ETFs, the eth price has responded negatively to these outflows, leading to a price drop below $4,200.
Will eth Price Recover from Here?
Outflows from Grayscale’s eth fund since the launch of the ethereum spot ETFs have been one of the main factors driving the price of eth down. However, it is not the only bearish development that has emerged for the cryptocurrency.
Thielen notes that eth price may have topped out, using the daily stochastic indicator as a guide. Now, when the value of this indicator is low, it often means that there is a buying opportunity and the price is reaching a low. Meanwhile, the high value suggests that the price of eth may have reached its peak.
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According to the report, the price of eth had reached a score of 92% in the days leading up to the launch of the ethereum spot ETFs. Typically, a score above 90% is bearish for the price as it means that the cryptocurrency is currently in overbought territory. Subsequently, the value of the stochastic indicator is expected to decline as investors dump their holdings.
So far, there has been a 5% drop, from 92% to 87%, suggesting that there is still a long way to go before the eth price stops bleeding. “Considering the recent rally and potential Mt. Gox overshoot, the US earnings season, and the weak seasons in August and September, it might make sense to push the ethereum short a bit further,” Markus Thielen said in closing.
Featured image created with Dall.E, chart from Tradingview.com
