Ethereum Price Tanks After Spot ETF Launch: Sell-the-News Event or Short-Term Dip?

Just a day after the highly anticipated launch of the US spot Ethereum ETF, the price of Ethereum has experienced a significant decline, exceeding 8% and dropping to as low as $3,150. This sharp drop has triggered substantial liquidations of long positions held in Ethereum over the past 24 hours.

Ethereum Liquidations Surge

Data from Coinglass reveals a surge in Ethereum liquidations surpassing those of Bitcoin in the last day. Currently, Ethereum liquidations stand at a staggering $97.8 million, compared to Bitcoin’s $80.9 million.

Long Positions Heavily Liquidated

Breaking down the Ethereum liquidations, a significant portion, $94.4 million, were long positions, with only $43.3 million targeting short positions. Notably, most of these liquidations occurred within the past four hours, coinciding with the intense selling pressure on Ethereum.

Sell-the-News Event?

Analysts suggest that the approval of the spot Ethereum ETF might have triggered a “sell-the-news” event, similar to what transpired with Bitcoin in January this year. With the price reaching $3,500 in July, investors appear to be capitalizing on the euphoria surrounding the ETF launch by cashing out.

ETH Whale Activity and Market Pressures

On-chain data indicates a prominent Ethereum whale offloaded a substantial amount of coins on July 24th. According to Spot on Chain, this whale deposited 10,000 ETH on Kraken, worth $34.2 million, just before the price drop, potentially profiting $173 million from the sale. The whale reportedly acquired these coins at $1,580 in September 2022 from Coinbase.

Furthermore, 10xResearch suggests that ongoing distributions from Mt. Gox are exerting additional pressure on the broader cryptocurrency market. They believe that Ethereum, potentially due to stagnant or declining fundamentals, might be the weakest link in this scenario.

Recovery on the Horizon?

Crypto analyst Michael van de Poppe remains optimistic, suggesting a potential reversal for Ethereum amidst strong outflows from the Grayscale Ethereum Trust. He predicts a two-week downward trend for ETH before a resumption of the rally towards new highs. The price may find support around $3,150 before rebounding.

Mixed Performance in Spot Ethereum ETFs

While spot Ethereum ETFs experienced a strong start with nearly $107 million in net inflows, data from Farside Investors reveals a decline on the second day, with investors withdrawing approximately $133 million.

Fidelity’s Ethereum Fund (FETH) emerged as the leader, attracting $74.5 million in net inflows, surpassing BlackRock’s iShares Ethereum Trust (ETHA) which garnered $17.5 million on Wednesday.

In contrast to the initial success of other ETFs, Grayscale’s Ethereum Trust (ETHE) witnessed significant outflows, totaling nearly $327 million, bringing the cumulative outflow since launch to a staggering $811 million. As a result, ETHE’s assets under management have dropped to $8.3 billion from $9 billion pre-launch.

Other Ethereum ETFs See Positive Inflows

However, there were bright spots. Grayscale’s Ethereum Mini Trust (ETH) registered approximately $46 million in inflows, positioning it as one of the most affordable spot Ethereum products in the US market. Similarly, Bitwise’s Ethereum ETF (ETHW) and VanEck’s Ethereum ETF (ETHV) reported net inflows exceeding $29 million and $20 million, respectively. Other positive performers included Franklin’s EZET and Invesco/Galaxy’s QETH.

Market Downturn

The broader market also experienced a decline, with the price of Bitcoin dropping 2.52% to $64,200 and the overall crypto market falling nearly 4%. This slump coincides with a decline in the US stock market, with the Nasdaq Composite and S&P 500 experiencing their worst days since October and December 2022, respectively.