Ethereum’s native token, Ether (ETH), has declined sharply a day after spot Ethereum ETFs were launched in the United States.
Ether suffers sell-the-news phenomenon
ETH’s price has fallen by approximately 8.75% in the past 24 hours, reaching around $3,170 on July 25. This decline followed the launch of eight spot Ether ETFs on the New York Stock Exchange, erasing nearly two weeks of prior gains and suggesting a "sell-the-news" reaction in the Ethereum markets.
"Sell-the-news" is a trading strategy where investors sell assets immediately after a highly anticipated event or news release. This often occurs despite the positive news, as the event may have already been priced in during the lead-up period.
Related: Ethereum ETF sell-off signals more trouble — 10x Research
In January, Bitcoin (BTC) had fallen similarly after the launch of its nine spot ETFs in the US.
Ether ETFs witness net outflows on day two
Ether's decline today was exacerbated by $113.3 million in outflows from its spot ETFs on their second trading day on July 24, primarily due to substantial withdrawals from Grayscale’s Ethereum Trust.
Notably, seven of the eight newly launched spot Ether ETFs saw net inflows. Leading the charge, the Fidelity Ethereum Fund (FETH) and the Bitwise Ethereum ETF (BITW) attracted $74.5 million and $29.6 million, respectively.
In contrast, BlackRock’s iShares Ethereum Trust (ETHA), which had the strongest inflows on July 23, garnered only $17.4 million from investors on July 24.
On the other hand, Grayscale Ethereum Trust (ETHE) experienced a staggering $326.9 million in outflows, similar to the withdrawals witnessed after the Grayscale Bitcoin ETF launch in January, due to its relatively higher fee. ETHE's fees are also the highest among all at 2.5%.
Nevertheless, Grayscale's Ethereum Mini Trust (ETH), with a 0.15% fee, attracted $15.1 million on July 24. This hints at traders rotating their capital out of Grayscale Ethereum Trust to seek opportunities in lower fee alternatives.
Mt. Gox's BTC reimbursements, tech market selloff
Today's Ether losses appear on the heels of the Mt. Gox's ongoing Bitcoin reimbursement to its creditors, as well as tumbling megacap technology shares.
Crypto exchanges Kraken and Bitstamp have begun repaying approximately 127,000 Mt. Gox creditors, who are owed over $9.4 billion worth of Bitcoin. These creditors, having waited more than a decade to recover their funds, now represent potential sell-pressure entering the market.
Ether's 30-day average correlation coefficient with Bitcoin stands at around 0.90, showing its higher likelihood of mirroring the top cryptocurrency's market trends, a major reason why its prices are going down today.
Growing risk aversion sentiment is further hurting ETH's prices.
On July 24, plummeting megacap technology shares dragged the US stock market to its worst day since 2022 as the fervor surrounding artificial intelligence began to wane. This sharp downturn has likewise dampened crypto traders’ sentiment.
“It mainly seems that after a bad night for equities in the US, crypto like most asset classes is feeling a little bit of a flow-on effect in sentiment,” argued Benjamin Celermajer, co-chief investment officer at Magnet Capital.
Ethereum leads long liquidations in crypto futures market
The "sell-the-news" decline in the Ethereum market has surprised traders, who were expecting a bull run immediately after the launch of the ETFs.
Notably, the Ethereum futures market has witnessed $103.65 million of long liquidations in the past 24 hours, the highest across the crypto market.
When the market moves against these long positions, the liquidation process triggers a selloff of the assets. This sudden increase in selling pressure drives the price further down, triggering more long liquidations, amplifying the momentum.
Descending channel correction
From a technical standpoint, Ether’s losses are part of correction that started after testing the upper trendline of its prevailing descending channel pattern.
Similar pullbacks have occurred in recent months, with the one in May preceding a 25%-plus correction toward the channel's lower trendline. If the fractal repeats, ETH’s price could decline toward the same downside target at around $2,850, which should serve as strong long-term support.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.
