Ethereum witnessed a significant price drop, falling around 8.75% to approximately $3,170 within 24 hours following the introduction of spot Ethereum ETF funds in the US. This sharp decline erased gains accumulated over the past two weeks. The market reaction came after eight spot Ethereum ETF funds were launched on the New York Stock Exchange.
Why is Ethereum Dropping?
The downturn in Ethereum’s value, observed on the second trading day after the ETF launch, was primarily due to substantial withdrawals from Grayscale’s Ethereum Trust, which saw an outflow of $113.3 million. Contrary to this trend, seven out of the eight newly introduced spot Ether ETF funds registered net inflows, with the Fidelity Ethereum Fund (FETH) and Bitwise Ethereum ETF (BITW) securing $74.5 million and $29.6 million, respectively. However, BlackRock’s iShares Ethereum Trust (ETHA), which led inflows initially, only garnered $17.4 million on the subsequent trading day.
Meanwhile, the Grayscale Ethereum Trust (ETHE) experienced a massive withdrawal of $326.9 million, echoing the outflows seen after the launch of the Grayscale Bitcoin ETF in January, attributed to its high 2.5% transaction fee. In contrast, Grayscale’s Ethereum Mini Trust (ETH) attracted $15.1 million, benefiting from a lower fee of 0.15%, signaling a shift of investors towards more cost-effective investment options.
What is Happening in the Futures Market?
Ethereum’s unexpected decline also impacted the futures market, which saw long liquidations amounting to $103.65 million over the last 24 hours, the highest in the crypto market. This wave of liquidations intensified the selling pressure, further depressing prices and triggering more liquidations, exacerbating the downward spiral.
Investment Shifts and Fees: Key Takeaways
– High fees at Grayscale’s Ethereum Trust are driving investors to lower-fee alternatives.
– Fidelity Ethereum Fund and Bitwise Ethereum ETF are major gainers among the new ETF launches.
– Significant withdrawals from Grayscale Ethereum Trust reflect similar trends seen previously in Bitcoin ETFs.
In conclusion, Ethereum’s price plummet post-ETF launch highlights the volatility and sensitivity of the crypto market to major financial maneuvers. The substantial withdrawals from high-fee trusts and the subsequent impacts on the futures market underline the critical role of fee structures in investor decisions.