In the aftermath of the launch of the Spot Ethereum ETFs, the price of ETH has surprisingly continued to struggle, defying the expectations of many in the market. The launch of the ETFs, which was initially met with excitement, has turned out to be a ‘sell the news’ event. Since the start of trading on Tuesday, July 23, Ethereum, the second-largest cryptocurrency by market cap, has seen a 10% decrease in value. This downward trend may not be over yet, as analysts predict further decline in the future.
According to a report by Markus Thielen, the Head of Research at Matrixport, there are several factors contributing to the decline in the price of Ethereum. One significant factor is the outflows from the Grayscale ETH fund, which holds a substantial amount of ETH. Following the launch of the Spot Ethereum ETFs, the Grayscale fund recorded significant outflows, totaling $481 million on the first day and $326 million on the following day. This can be attributed to the high management fees of the fund compared to competitors offering much lower fees, as low as 0.19%. Additionally, the Mt. Gox distributions overlapping with the ETF launch added selling pressure to the market.
Thielen also points out that the ETH price may have already hit its peak, using the daily stochastics indicator as evidence. The indicator, which was at 92% in the days leading up to the ETF launch, is seen as bearish when it exceeds 90% as it indicates overbought conditions. The subsequent decline from 92% to 87% suggests that there is still room for the price of Ethereum to drop further. Given the recent rally, concerns about Mt. Gox, the US earnings season, and weak seasonal trends in August and September, Thielen suggests that shorting Ethereum may still be a viable strategy.
The unexpected struggle of the Ethereum price post-Spot ETF launch highlights the complexity of the cryptocurrency market. While the launch of the ETFs was expected to bring positive momentum to Ethereum, the reality has been quite different. With outflows from the Grayscale ETH fund and indications of a price decline, investors must carefully consider their positions in Ethereum moving forward. As the market continues to evolve and respond to various factors, it is essential to stay informed and adaptable in order to navigate the volatile world of cryptocurrency successfully.
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