The US debut of Ethereum exchange-traded funds (ETFs) this week triggered significant market shifts, with the Grayscale Ethereum Trust (ETHE) losing over $800 million. This highlights the inherent volatility and complex outlook surrounding crypto ETF launch events.
Analysts remain optimistic about Ethereum’s recovery despite recent sell-offs.
On Tuesday, the debut of Ethereum ETFs saw initial excitement fade quickly. Within two days, the market recorded a net outflow of $26.7 million from these ETFs, causing Ethereum’s price to drop. Grayscale’s Ethereum Trust faced the largest outflow, losing $484.1 million on the first day and $326.9 million on the second.
Despite an influx of $74.5 million into Fidelity’s Ethereum ETF and $45.9 million into Grayscale’s Ethereum Mini Trust on Wednesday, overall sentiment remained bearish. Ethereum’s price reflected this, falling 8% in the last 24 hours to $3,167.
Source: BeInCrypto
Several factors have contributed to the recent downturn in Ethereum’s price. The launch of Ethereum ETFs coincided with the distribution of Bitcoin from the defunct Mt. Gox, exacerbating sell-off pressures. Additionally, the weak start to the US tech earnings season, with companies like Alphabet and Tesla experiencing sell-offs, has impacted crypto investments, according to 10X Research.
Lack of marketing efforts is also seen as a contributing factor. “We have not heard any marketing campaigns from Ethereum ETF issuers. Isn’t it bizarre that Vitalik is not on Bloomberg or CNBC explaining what Ethereum is? Does he even care? Have you ever seen this during an IPO when the company is not running some form of awareness? Interest among crypto investors is already shallow, as many focus on Solana instead of Ethereum,” Markus Thielen from 10X Research said.
Historically, cryptocurrency launches often trigger initial enthusiasm followed by quick profit-taking, known as a ‘sell-the-news’ event. This pattern was evident in January 2024 with the introduction of spot Bitcoin ETFs, suggesting a recurring trend in crypto markets.
“In the weeks following the trade of the Ethereum spot ETFs, ETH prices are anticipated to remain volatile. This volatility is largely attributed to the conversion of the $11 billion Grayscale Ethereum Trust (ETHE) into a spot ETF, which is expected to cause a short-term net outflow of funds,” said Edward Wu, an analyst at BloFin Research & Options, to BeInCrypto.
However, some analysts remain optimistic about Ethereum’s recovery, drawing parallels to Bitcoin’s post-ETF performance.
“If the markets copy the price action of the Bitcoin ETF, then it’s likely that we’ll have a slight sell-off due to the outflows of the Grayscale trust. One to two weeks of downward momentum before the real surge of Ethereum towards a new all-time high,” said Michael van de Poppe.
In related news, Hong Kong is exploring the inclusion of staking in its spot Ethereum ETFs to differentiate from their US counterparts. This strategy could provide a temporary edge in the competitive ETF market despite higher management fees compared to those in the US.
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