Ethereum
Ether Price Dropped After Spot ETF Launch. Can It Bounce Back?
Key points to remember
- The price of ether, the underlying cryptocurrency of Ethereum, has fallen about 3% since spot ether exchange-traded funds (ETFs) began trading in the United States last week.
- Much of this decline is believed to be due to outflows from the Ethereum Grayscale Trust, a pre-existing ether fund that recently converted to an ETF.
- In a similar move, the price of bitcoin also fell in the first few weeks after the launch of spot bitcoin ETFs, and the Grayscale Bitcoin Trust saw large outflows at that time.
- According to a BlackRock representative, ether is the only crypto asset besides bitcoin that its clients have expressed interest in; he believes crypto activity among large wealth managers should pick up later this year.
Ether (ETH), the underlying cryptocurrency of the Ethereum network, is down about 3% after launched last week spot ether exchange-traded funds (ETFs) on U.S. exchanges. However, prices are still up more than 10% from the days before the surprising reversal in May of the Securities and Exchange Commission’s (SEC) crypto policy that ultimately led to the launch of these ETFs.
The main reason for the drop in the price of Ether since launch is Grayscale Ethereum Trust Legacy (ETHÉ). It held about $10 billion worth of ether before its ETF conversion, and in the week following its conversion, it saw outflows of more than $1.8 billion, according to Farside Investors. Analysts pointed to the relatively high costs of 2.5% as one of the reasons investors abandoned the fund, putting downward pressure on the price of ether.
Global Spot Ether ETF Market Sees Outflows
Although much of the money flowing out of ETHE has found its way into other spot ether ETFs, the cumulative net outflows for the entire spot ether ETF market currently stand at $406.4 million.
It should be noted that a almost identical situation occurred earlier this year in the Bitcoin ETF spot market with the Grayscale Bitcoin Trust (GBTC), with bitcoin having suffered a parallel decline of around 10% in the first two weeks of bitcoin spot ETF trading.
According to Tom Dunleavy, Partner at MV Capital, August is expected to continue as a month of net outflows for spot ether ETFs. “With around $1 billion in ETH outflows per week, we should settle into a new stable state for ETH by the end of August,” Dunleavy said on social media platform X.
How will the price of Ether evolve?
Cryptocurrency market analysts have differing opinions on where the price of ether could go after the decline in outflows from the former Grayscale Ethereum Trust.
Previously, Matt Hougan, Bitwise’s Chief Investment Officer made the argument $15 billion will flow into the U.S. spot ether ETFs in the first 18 months after their launch. And Robert Mitchnik, BlackRock’s head of digital assets, indicated at the recent Bitcoin 2024 conference that major financial institutions could start soliciting investments in crypto spot ETFs later this year, which is in line with what Bloomberg crypto analyst James Seyffart has predicted. told Investopedia earlier this month.
Mitchnik said: “Our current customer base is primarily interested in bitcoin. And then, to some extent, ETH; there’s certainly interest in ETH as well. And there’s very little interest, today, beyond those two.”
That said, the investment case for Ether differs from that of Bitcoin, and Ethereum’s technology-driven investment thesis has left it open to competition from companies such as Solanavarious bitcoins Layer 2 Networksand others, according to VanEck’s former director of digital asset strategy, Gabor Gurbacs.