Ethereum
What to expect on day one as selling concerns scare some traders
Ether (ETH) surged above $3,500 ahead of cash exchange-traded funds (ETFs) set to go live for trading Tuesday, a market that some observers say could see moderate inflows in its first few weeks.
“Market participants are also closely monitoring Grayscale’s $9 billion ETH Trust as they fear that potential selling pressure from Grayscale could counteract the positive effects of new inflows, potentially putting downward pressure on the market,” Vivien Wong, partner at HashKey Capital’s Liquid Funds, wrote in an email to CoinDesk on Tuesday.
Wong’s company, HashKey, helped launch one of the Ether ETFs in Hong Kong. It estimates that capital flows will reach $3 billion in the first six months of U.S. trading, citing bitcoin’s market cap of 30% of Ether’s and the lack of staking.
Ether’s inflation rate, which increases the supply of tokens on the open market, is also a concern.
“Over the past month, ETH supply has increased by about 60,000 ETH, contrary to expectations,” Wong said. “Although ETH supply has decreased by about 300,000 ETH since the merge, continued inflation at this rate could reverse this reduction within six months, potentially turning ETH into an inflationary asset again.”
ETH reversed losses from Monday’s trading session to gain 0.57% over the past 24 hours, according to data from CoinGecko, outperforming the broader index. CoinDesk 20 (CD20) index, which fell by 1.7%.
Eight issuers, including BlackRock, received approval for their latest S-1 filings with the U.S. Securities and Exchange Commission on Monday.
Market watchers are wondering whether the ETFs could mirror the performance of their Bitcoin counterparts, which were issued in January and have since attracted more $17 billion in net inflows.
“The main question is will ETH ETFs outperform Bitcoin ETFs? On a technical level, Ethereum has more utility than Bitcoin with features like liquid staking,” Danny Chong, co-founder of Tranchess, told CoinDesk in an email. “ETH ETFs were slow to meet industry expectations when they launched in Hong Kong.”
“However, I believe that with a broader investor base, ETH ETFs should be able to perform better and provide the liquidity we need,” Chong added.