Post the Spot Ethereum ETFs Launchthe price of ETH has continued to struggle unexpectedly, proving that the launch of spot ETFs was a “sell the news” event. So far, the second-largest cryptocurrency by market cap has lost about 10% of its value since trading of spot Ethereum ETFs began on Tuesday, July 23, and could see an even greater decline from here, according to an analysis by Matrixport.
Spot Ethereum ETFs trigger selloff
Following the Spot Ethereum ETFs Launchthere was a lot of excitement in the market, especially around the fact that investors could now gain exposure to ETH without having to directly purchase the underlying token. However, this excitement was short-lived as days after the launch, the price of ETH continues to struggle.
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In a report released Thursday, Markus Thielen, head of research at Matrixport, outlined a number of reasons why the price of ETH was falling. As Thielen explains, while the inflows exceeded US$100 million On the first day, the Grayscale Ethereum fund was experiencing outflows.
Just like the launch of Spot Bitcoin ETFs, the ETH grayscale backgroundwhich holds around $9 billion worth of ETH, started recording exits. This is because Grayscale’s management fees remain high, with competitors offering fees as low as 0.19%. On the first day alone, $481 million left the fund, and $326 million followed the next day.
Furthermore, the Mt. Gox distributions began around the time of the launch of the Spot Ethereum ETFs, which also put extra selling pressure on the crypto market. Just as the Bitcoin price did with the spot Bitcoin ETFs, the ETH price responded negatively to these outflows, leading to a price drop below $4,200.
Will ETH Price Recover From Here?
Grayscale ETH Fund Outflows Since Spot Ethereum ETFs Launch have been one of the main factors driving the decline in ETH’s price. However, it is not the only bearish development that has emerged for the cryptocurrency.
Thielen points out that the price of ETH may have topped, using the daily stochastic indicator as a guide. Now, when the value of this indicator is low, it often means a buying opportunity and the price is reaching a low level. Meanwhile, the high value suggests that the price of ETH may have reached its top.
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According to the report, the price of ETH reached a score of 92% in the days leading up to the launch of the Spot Ethereum ETFs. Typically, a score above 90% is bearish for the price as it means the cryptocurrency is currently in overbought territory. Subsequently, the value of the stochastic indicator is expected to decline as investors unload their holdings.
So far, there has been a 5% decline, from 92% to 87%, suggesting there is still a long way to go before ETH price stops bleeding. “Given the recent rally and potential overhang of Mt. Gox, the US earnings season, and the weak August and September seasons, it might make sense to push Ethereum a bit further,” Markus Thielen said in closing.
Featured image created with Dall.E, chart from Tradingview.com