The Ethereum ETF officially started trading last night. Perhaps because the expectation of ETF approval has long been digested by the market, the price of ETH has not fluctuated significantly after the SEC’s announcement. As of the time of writing, it is temporarily reported at 3450, a 24-hour drop of 1.3%.

At present, one of the issues that the market is most concerned about is undoubtedly the subsequent trend of ETH prices. Can the capital inflow brought by ETFs boost the price of ETH? Will there be a potential trend of "good news leads to bad news"?

Although the price of ETH rose to $3,959 at the end of May, it fell below $3,000 in early July. This in itself shows that traders are not confident that the price of ETH will continue to rise. Although ETH has rebounded to $3,500 before the approval of this ETF, we suspect that many people will choose to sell and take profits as soon as the ETF is launched - or even before it is launched.

When the Bitcoin spot ETF was released, the annualized funding rate in the futures market was close to 15%, and it once increased to 70% in February, which attracted the attention of many arbitrage funds - they would buy ETFs and hedge futures to earn arbitrage profits. This buying action strengthened the bullish sentiment around BTC.

Currently, the annualized funding rate of the Ethereum futures market is only 7-9%, which is not very attractive to arbitrage institutions, especially considering the capital rest cost of at least 5% (federal funds rate). Compared with the situation of Bitcoin spot ETF in February, the Ethereum spot ETF is expected to be less likely to attract too much arbitrage funds, thereby weakening the optimism about ETH.

From a technical perspective, ETH’s Stochastics indicator has basically peaked, which means that this is a good short-selling opportunity.

Traders can also sell Ethereum put options and buy Bitcoin call options at the operational level. Options are relatively expensive, though, with implied volatility at the September 27 expiration at 65%, but 30-day realized volatility at just 50%, suggesting that implied volatility includes a significant premium.

Judging from the market discussion heat, the discussion about Solana in this cycle is also significantly higher than that of Ethereum. The Solana ecosystem gave birth to the craze of meme tokens, while Ethereum missed this opportunity due to high gas fees. We can cite various data to prove that Solana is more popular than Ethereum. For example, Solana currently has 14.2 million active addresses, while Ethereum has only 7.5 million...

Ethereum’s market dominance, which reached a high of 18.4% a month ago, has dropped to 17.0% today. The lack of market interest is also reflected in gas prices that have never rebounded. The Dencun upgrade in March 2024 significantly reduced network fees, but the number of network transactions has stagnated, the number of active addresses is similar to three years ago, and the Ethereum network has barely grown.

In a trade finance environment with zero interest rates, Ethereum’s staking yield advantage was a key reason for the ecosystem to breed DeFi Summer in 2020 and 2021. Today, Ethereum’s staking yield is only 3.12%, and Coinbase’s Ethereum staking yield is only 2.91%. Although ETFs themselves do not involve staking, from a yield perspective, opportunity cost is a key reason for the low demand for ETH in this cycle.

Compared with BTC, ETH's beta coefficient is also weakening. Since the beginning of this bull market, ETH's performance has been less than ideal. If we start from October 2022, ETH's performance lags behind BTC by 40%.

Considering the above factors and the fact that the ETF issuer has not yet carried out large-scale marketing activities; coupled with the fact that some traders will choose to close some long positions when the news comes out; in addition, there is also the potential outflow of funds from Grayscale... This can indeed be a reason to be bearish on ETH, at least in the early stages.

Later, I will bring you analysis of leading projects in other tracks. If you are interested, you can click to follow. I will also organize some cutting-edge consulting and project reviews from time to time. Welcome all like-minded people in the cryptocurrency circle to explore together.