Ethereum
Ethereum Price Holds Steady Despite ETF Debut Today: Here’s Why
On a day marked by the much-anticipated launch of the Ethereum (ETH) exchange-traded fund (ETF) in the United States, the market response was surprisingly muted. Analysts at Singapore-based crypto asset trading firm QCP Capital said: turn on the light on the reasons for this muted reaction, blaming the situation on previous market behavior and other broader market news.
Why Ethereum Price Isn’t Skyrocketing
In its note to investors, QCP Capital points out that the market could adhere to a “buy the hype, sell the news” model, similar to the scenario of the launch of the U.S. Bitcoin spot ETF. When the Bitcoin spot ETF made its debut On January 11 this year, Bitcoin prices skyrocketed ahead of the launch, but then fell back to $38,000, registering a -21% drop in the first 12 days after the launch.
This price action was primarily driven by outflows from the Grayscale Bitcoin ETF, which converted from the GBTC Trust and opened up the opportunity for investors to withdraw their holdings for the first time in years. A similar scenario could be on the horizon for ETH, although there is one key difference with Grayscale launches “Mini ETF”.“
As a reminder, Bitcoin then hit new all-time highs in two months. QCP therefore suggests that investors be cautious and wait for further developments before making any major moves in the ETH market.
Additionally, the overall market sentiment, which is heavily influenced by Bitcoin’s movements, could also play a crucial role. In particular, Bitcoin transfers by the US government and Mt. Gox have created a ripple effect that impacts the dynamics of the cryptocurrency market as a whole.
This morning, the US government transferred 58,742 BTC to Coinbase, while still holding 213,239 BTC worth about $14.2 billion. At the same time, Mt. Gox moved approximately 47,600 BTC to various wallets, including 5,110 BTC ($340.1 million) to Bitstamp. These large movements could contribute to the market’s cautious stance.
While Ethereum spot prices remain stable, the options market is showing notable activity. QCP observed that volatility on July 26th saw an impressive 8 volumes increase, with a 3 volume decrease in the risk of reversal (RR). This signals increased caution towards potential downside moves. The divergence between the spot and options markets indicates that traders may be preparing for further price declines in the near term.
“The options market appears to be expecting further downside moves in the near term, exacerbated by the US government and Mt Gox news,” QCP commented.
Given the current conditions, QCP Capital suggests that Ethereum prices could remain weak in the short term. The firm points to potential BTC selling pressures from the US government and Mt Gox as key factors that could indirectly prevent ETH prices from rising.
Additionally, with the impact of the ETH Spot ETF yet to be reflected in the market, traders may wait for momentum to build, perhaps as the US election approaches. QCP’s investor note concludes: “With the ETH Spot ETF potentially not impacting prices initially, coupled with potential selling pressure from the US government and Mt Gox, prices may remain subdued until momentum builds ahead of the election.”
At press time, ETH was trading at $3,513, up 0.5% over the past 24 hours.
Featured image created with DALL·E, chart by TradingView.com