Following the launch of Spot Ethereum ETFs, the price of ETH has experienced unexpected struggles, indicating that the event was a classic case of ‘sell the news’. Despite initial excitement in the market about investors gaining exposure to ETH without directly buying the token, the price of the second-largest cryptocurrency by market cap has seen a significant decline.
Markus Thielen, Head of Research at Matrixport, highlights several factors contributing to the decline in ETH price post the Spot Ethereum ETFs launch. Notably, the Grayscale Ethereum fund, holding approximately $9 billion in ETH, has been experiencing outflows due to high management fees compared to competitors offering lower fees as low as 0.19%.
In addition to the outflows from the Grayscale ETH fund, the Mt. Gox distributions coinciding with the Spot Ethereum ETFs launch have added selling pressure to the crypto market. Similar to the impact seen with the Spot Bitcoin ETFs, the ETH price has responded negatively to these developments, dropping below $4,200.
Thielen suggests that the ETH price may have peaked, pointing to the daily stochastics indicator as a guide. When the indicator value is high, it indicates that the price may have reached its top, which was the case with the ETH price scoring 92% in the days leading up to the Spot Ethereum ETFs launch. A score above 90% typically suggests that the cryptocurrency is in overbought territory, leading to a subsequent decline as investors sell off their holdings.
With a 5% decline in the stochastic indicator value post the launch of Spot Ethereum ETFs, indicating a move from 92% to 87%, there is still potential for further price decline in ETH. Considering factors such as the recent rally, overhang from Mt. Gox, US earnings season, and weak seasonals in August and September, Thielen advises caution and potentially staying short on Ethereum for a bit longer.
The launch of Spot Ethereum ETFs has not had the desired positive impact on the ETH price, with several bearish developments contributing to the decline. Investors and traders in the crypto market need to carefully assess the ongoing market conditions and technical indicators to make informed decisions regarding their ETH holdings.
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