Only two days after the Ethereum spot ETF was officially traded, the market began to fall sharply. Interestingly, Ethereum had risen due to good news some time ago, but the bad news after the good news was exhausted made it fall much more than BTC and SOL. ETH fell below $3,200, with a 24-hour drop of more than 8%. Ethereum ecological tokens ushered in a significant drop. Bitcoin once fell below $64,000, a drop of 3%, and SOL fell by 2%. In the past hour, the entire network had a liquidation of $113 million, of which long orders were liquidated for $108 million and short orders were liquidated for $4.2254 million.

After Mt. Gox repaid its creditors, the trading volume of BTC spot trading pairs on the Kraken platform and the platform inflow/outflow did not show any abnormalities outside the range. The decline of BTC may be caused by market sentiment rather than real selling.

Since the sell-off in Mentougou did not happen, what negative macro factors are affecting capital flows?

The plunge in US stocks dragged down global risk assets

Tesla and Google's financial reports were weaker than expected, triggering investors' pessimism about the AI ​​bubble, dragging the Nasdaq and S&P 500 to close down 3.64% and 2.31%, respectively, marking the biggest single-day drop in a year and a half since the end of 2022, and leading to a collapse of U.S. stock indices across the board, with the Dow Jones Industrial Average falling 500 points, the small-cap index falling 2.1%, the chip index falling 5.4%, and the Chinese concept stock index falling nearly 2%.

U.S. stocks suffered their worst day in months, sparking investor concerns that the "Big Seven" that have driven up U.S. stocks may be losing steam.

The total market value of technology giants has shrunk by nearly $1.75 trillion from its peak ten days ago. Tesla closed down 12.33%, the largest single-day drop since September 2020. Nvidia fell 6.8%, Meta fell more than 5.6%, Google fell 5.04%, the largest drop in half a year since the end of January, Microsoft fell about 3.6%, Amazon fell about 3%, and Apple fell about 2.9%.

As risk assets such as U.S. stocks performed disappointingly, risk aversion among global investors intensified. Crypto assets with high liquidity were inevitably affected, leading to capital outflows and declines.

News of the listing of spot Ethereum ETF has been digested by the market

The spot Ethereum ETF had a cumulative trading volume of about $951 million on Wednesday. On the first day of listing on Tuesday, the funds had a trading volume of $1.054 billion.

The Ethereum ETF’s first day performance was within expectations compared to the BTC ETF. Our estimates are set by analyzing the market cap of ETH versus BTC. ETH’s market cap is currently about 30% of BTC’s. Conservatively, ETH trading volume is about 20-30% of BTC’s trading volume.”

Although the spot ETF debut on Tuesday was quite successful, ETH did not perform well, falling to 3,300 yuan at one point. Compared with Bitcoin, ETH prices also hit their lowest level in two months. This shows that the launch of ETFs has been largely priced in, especially since the key ETF documents were approved by the SEC in May. Yesterday's article "Why did the ETH price fall instead of rising? Good news landed as bad news? What to look at next" also detailed some of the reasons for being bearish on Ethereum.

Have you sold the coins transferred from Mentougou?

The negative news that is hanging over is nothing more than the crash of the Mentougou incident. The currency transfer is frequent and compensation is made every day. Although there is an impact, it is most likely not the impact of the direct crash, but the impact of panic. The compensation is distributed to many creditors. Will they all crash at the same time? Obviously unrealistic, the scattered and dispersed selling pressure is completely acceptable and digestible to the market.

The key is that retail investors and institutional investors who are affected by panic are all selling, which creates a certain amount of selling pressure, especially when the net inflow of ETFs is lower than expected.

Grayscale old man starts selling again

The same routine as Bitcoin ETF, Grayscale has been selling GBTC after Bitcoin ETF was launched, and now it has started to sell ETHE. Yesterday, the US spot Ethereum ETF had a total net outflow of 133 million US dollars. Among them, Grayscale had a net outflow of 326.9 million US dollars, which resisted all the institutional inflows. Let's see if it can be reversed in the next two days. If it is reversed, it will be a small correction without any impact. If it is still a net outflow every day, it will fall for a while.

Grayscale ETHE currently still holds about 2.4 million ETH, and 9% has flowed out in the past two days. If the final outflow ratio of ETHE is assumed to be 50%, it will take another 9 trading days at the current outflow rate. In the near future, it depends on whether the inflow of ETF can cover the selling pressure of Grayscale.

I said it in the group and in the article yesterday that the current market conditions are only suitable for short-term trading, and it’s okay to just make some money. There are indeed some coins that I think are good for long-term trading, but they must be bought in batches to prevent the emergence of this kind of market conditions.

The market will definitely rise in the second half of the year, and interest rate cuts will also lead to speculation. In the short term, it depends on whether ETI's funds can withstand the selling pressure from Mentougou and various governments. If it can be fully absorbed, there will be no problem. If it can't withstand it, there will be another big wash, so the capital inflow in the market is more critical now.

This wave of Mentougou's impact on market sentiment and psychology is not as strong as the first one, but it is estimated that it will take a long time to digest the selling pressure.

If there is negative economic data, BTC may fall back below 62,000 again, so the recent market is mainly based on waiting and making plans based on the capital inflow situation.

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