Ethereum
ETH ETF Launches, Traders Sell the News Again
BTC/USD and ETH/USD Key Points
- Unsurprisingly to any seasoned cryptocurrency market participant, the launch of Ethereum spot ETFs led to a classic “sell the news” reaction in the price of ETH/USD.
- Either way, the odds seem to be tilting in favor of a more lenient regulatory regime from January.
- The Fed is expected to cut interest rates by 70 basis points by the end of the year, the most accommodative expectations since early April.
Crypto-asset market news
Stop me if you’ve heard this before, but last week we saw another successful launch of a major new cryptocurrency-related financial product, and the crypto asset in question sold off. In a story as old as time, the launch of Ethereum spot ETFs led to a classic “sell the news” reaction in the price of ETH/USD (more on that below), despite a soft start and solid volume in the product itself.
Politics, meanwhile, remains a major concern for crypto markets, with U.S. presidential candidates Donald Trump and Robert F. Kennedy Jr. set to speak at the Bitcoin conference in Nashville on Saturday after this article went to press. There are rumors of a potential “strategic bitcoin reserve” being announced, a development that would be as optimistic as it is unlikely in our view.
Presumptive Democratic nominee Kamala Harris was briefly mentioned as a potential speaker at the event, but she apparently declined the invitation midweek. However, according to Mark Cuban, she reached out to him for perspective on the asset class. In a summary of his remarks, Cuban noted: “The feedback I’m getting, but certainly not confirmed by the vice president, is that she’s going to be much more open for business, [artificial intelligence]crypto and government as a service. Changing the policies changes the message and lets everyone know that she is in charge and open, literally, for business.” Either way, the odds seem to be tilting toward a more tolerant regulatory regime starting in January.
Macroeconomic context
From a macro perspective, the week started off quiet, with key economic data being retrospectively weighted from Wednesday. The Bank of Canada cut interest rates as expected on Wednesday, underscoring the broader trend toward more accommodative central banks. Then, on Thursday, U.S. second-quarter GDP grew at a better-than-expected 2.8% annualized, along with the worst durable goods orders report since COVID, taking much of the shine off the strong GDP. Friday’s slightly stronger-than-expected U.S. core PCE reading was largely driven by the aforementioned GDP report, downplaying the bullish implications.
Overall, traders are now pricing in a 70 basis point interest rate cut from the Federal Reserve by the end of the year, or nearly three full rate cuts. This is the most dovish expectations for the U.S. central bank since April, a move that would ease monetary policy and potentially serve as a bullish catalyst for crypto assets in general.
Source: CME FedWatch
Feeling and flow
The sentiment index we’re watching more closely, the Crypto Fear and Greed Index, has moved further into “greed” territory over the past week, though it remains far from the extremes that tend to mark major tops. Overall, it remains in line with the average range seen over the past year, without providing any major contrarian reversal signals.
Source: Alternative.me
Another way to gauge sentiment, flows into exchange-based crypto investment vehicles remained broadly positive last week, though they were moderate compared to the blistering rate of inflows we saw the week before. At the time of writing ahead of Friday’s data release, Bitcoin ETFs had seen $483.5 million in inflows, roughly in line with the $520 million 4-day average they’ve seen since their January launch. In the long term, these flows from “tradfi” investors provide additional demand for Bitcoin and could help support the price.
Source: Farside Investors
Ether ETFs have seen net outflows in the first few days of trading as traders try to “speed up” the exodus from the higher-fee legacy Grayscale product (ETHE). These outflows, which have already totaled over 12% of the fund in just 3 days, may well continue for the next few weeks until it reaches a more appropriate asset level given its fee structure.
Bitcoin Technical Analysis: BTC/USD Daily Chart
Source: StoneX, TradingView
In strange circumstances, Bitcoin is trading almost exactly where it was when this weekly report was last released. As we noted last week, “the cryptocurrency remains below the previous support-turned-resistance at $60,000 and its 200-day moving average, so bulls will want to see if it can reclaim these levels before becoming more constructive on Bitcoin’s long-term outlook.” Perhaps after a week of consolidation, the pair is less overbought from a short-term perspective, potentially opening the way for a near-term move higher.
Ethereum Technical Analysis: ETH/USD Daily Chart
Source: StoneX, TradingView
Unlike its big brother, Ether saw a more significant pullback last week as traders followed the recurring “sell the news” pattern around new financial product launches for crypto assets. ETH/USD is currently trading almost exactly at its 200-day moving average, with a medium-term range established between the $2,875 support and $4,000 resistance. The short-term outlook remains neutral until this range resolves one way or another.
— Written by Matt Weller, Global Head of Research
Check out Matt’s daily market update videos and be sure to follow Matt on Twitter: @MWellerFX