Thomas Fahrer, co-founder of Apollo, a company focused on Bitcoin adoption, issued a stark warning about potential market dynamics following the approval of Ethereum spot ETFs. As the market anticipates this new development, Fahrer suggests that the transition may not be smooth for Ethereum.
“The Grayscale Ethereum Trust launched in 2017 and accumulated most of its $9 billion in ETH long before staking existed. These funds will be unlocked now. Expect a bloodbath. This will speed up ETH -> BTC trade. Hold me accountable if I’m wrong. But I doubt it,” Fahrer declared via social media platform X.
Spot Ethereum ETFs – A “News Sell” Event?
The imminent approval of spot Ethereum ETFs, similar to the launch of spot Bitcoin ETFs earlier this year, is expected to convert the $9 billion (approximately 2.94 million ETH) locked in Grayscale’s Ethereum Trust (ETHE) into one of these ETF. Historical precedent with Bitcoin suggests potential volatility; Following the approval of spot Bitcoin ETFs, Bitcoin experienced a more than 20% drop in value in 12 days amid significant sell-offs from similar conversions.
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One of the main reasons why the spot BTC ETF approval ended up being a “news sell-off” event was Grayscale’s transition from an Ethereum Trust to a spot ETF. Until now, Grayscale Bitcoin Trust (GBTC) saw outflows of over 50% of its BTC holdings. And ETHE could be bolstered by the fact that staking ETH is a profitable option to earn additional yield.
Grayscale currently holds over $9 billion in locked Ethereum that cannot be sold or traded until the ETF is operational. If approved, this large amount of Ethereum will suddenly become liquid, potentially leading to substantial sell-offs in the market if initial demand does not match the volume of outflows from Grayscale’s new ETF.
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Julio Moreno, head of research at CryptoQuant, highlighted a critical market indicator that may suggest that the market has already started to react. “It appears that the market has already priced in the approval of the Ethereum spot ETF. Grayscale’s ETHE to ETH discount has narrowed significantly over the past few days. The same happened between GBTC and Bitcoin as Bitcoin Spot ETF approval approached,” Moreno noted via X.
While the short-term impact may reflect the turbulent times seen during the Bitcoin ETF Launch, the long-term implications for Ethereum could be different. Observers note that despite the initial dips seen in Bitcoin’s post-ETF valuation, the introduction of a spot ETF turned out to be beneficial, leading to greater market acceptance and an increase in prices.
“BTC rose 75% in 63 days after spot ETF approval. If ETH follows the same trend (if approved), this will take it to $6,446 by July 23rd,” said crypto analyst Miles Deutscher. observed.
At press time, ETH traded at $3,676.
![When Spot Ethereum ETFs Go Live, 'Expect a Bloodbath': Expert 1 Ethereum Price](https://thegurumedia.com/wp-content/uploads/2024/05/ETHUSD_2024-05-24_10-06-21.png)
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