After the launch of Spot Ethereum ETFs, the ETH price has unexpectedly struggled, leading to a 10% decline since trading began on July 23. This decline has surprised many investors and analysts, indicating that the launch of the ETFs was a ‘sell the news’ event. Despite the initial excitement surrounding the ETFs, the ETH price has continued to face challenges in the market.
Markus Thielen, Head of Research at Matrixport, highlighted several reasons for the ETH price decline in a recent report. One major factor contributing to the decline is the outflows from the Grayscale Ethereum fund, which holds approximately $9 billion in ETH. Competitors offering lower management fees have caused investors to withdraw funds from Grayscale, with $481 million leaving the fund on the first day of trading the Spot Ethereum ETFs, followed by $326 million the next day.
In addition to the outflows from the Grayscale ETH fund, the Mt. Gox distributions have also put selling pressure on the crypto market around the time of the Spot Ethereum ETFs launch. This has further contributed to the negative response of the ETH price, which has fallen below $4,200. The combination of these factors has created a bearish outlook for Ethereum in the near term.
The report by Matrixport suggests that the ETH price may have reached its peak based on the daily stochastics indicator. A score above 90% on the indicator indicates that the cryptocurrency is in overbought territory, signaling a potential decline in price as investors sell off their holdings. With the ETH price hitting a score of 92% before the Spot Ethereum ETFs launch, there is still room for further decline as the indicator drops from 92% to 87%.
Looking ahead, Thielen advises cautiousness in trading Ethereum, considering factors such as the recent rally, potential overhang from Mt. Gox distributions, the US earnings season, and weak seasonals for August and September. This suggests that it may be wise to continue pressing the Ethereum short position until further indicators signal a potential reversal in the price trend. As the market continues to evolve, it will be important for investors to monitor these developments closely.
