Thomas Fahrer, co-founder of Apollo, a firm focused on Bitcoin adoption, has recently expressed concerns about the potential market dynamics that could follow the approval of spot Ethereum ETFs. His warning comes as the market eagerly awaits this new development, with Fahrer cautioning that the transition may not be as smooth for Ethereum as some might anticipate.
Fahrer pointed out that the Grayscale Ethereum Trust, which was launched in 2017 and currently holds approximately $9 billion worth of ETH, acquired most of its holdings before the concept of staking existed. With the approval of spot Ethereum ETFs imminent, these funds will be unlocked, potentially leading to what Fahrer describes as a “bloodbath.” He believes that this could accelerate the trading of Ethereum for Bitcoin, a sentiment that he shared via a social media platform.
The approval of spot Ethereum ETFs is expected to follow a similar path as spot Bitcoin ETFs did earlier this year. Following the approval of spot Bitcoin ETFs, Bitcoin experienced a significant drop in value, exceeding 20% within a span of 12 days. This decline was attributed to substantial sell-offs from similar conversions, indicating potential volatility in the market.
Just like the transition from Grayscale’s Ethereum Trust to a spot ETF, the approval of spot BTC ETFs was considered a “sell the news” event. Grayscale’s Bitcoin Trust witnessed outflows of more than 50% of its BTC holdings following the approval. The transition of the Grayscale Ethereum Trust (ETHE) to an ETF could face similar challenges, especially considering the lucrative option of ETH staking to earn additional yield.
Julio Moreno, head of research at CryptoQuant, pointed out a critical market indicator suggesting that the market may have already factored in the approval of Ethereum spot ETFs. The narrowing discount of Grayscale’s ETHE to ETH in recent days mirrors the market behavior seen before the approval of Bitcoin spot ETFs. This could indicate that the market is already reacting to the impending approval.
While the short-term impact of the spot Ethereum ETF approval may lead to turbulence in the market, observers believe that the long-term implications for Ethereum could be more beneficial. Despite initial downturns in Bitcoin’s valuation post-ETF approval, the introduction of a spot ETF eventually led to greater market acceptance and a substantial price surge. Crypto analyst Miles Deutscher even suggested that ETH could follow a similar trend as BTC did post-ETF approval, potentially reaching $6,446 by a certain date.
The approval of spot Ethereum ETFs could potentially have a significant impact on market dynamics. While there are concerns about potential sell-offs and market volatility in the short term, the long-term implications could be positive for Ethereum. It remains to be seen how the market will react to the approval of these ETFs and how Ethereum’s value will be affected in the coming days and weeks.
Leave a Reply