Why The Ethereum ETF Could Not Prevent The Price Crash
Ethereum price drops 10% following ETF launch, contrary to optimistic expectations.
The drop is caused by factors such as market corrections and external pressure.
Reasons for the sudden price drop
The initial reaction to these ETFs was lower than expected, despite the optimism surrounding the trade.
According to 10x Research, the rapid fading of the initial excitement surrounding the Ethereum ETFs led to the classic “sell the news” scenario.
The cryptocurrency market is not a new phenomenon. Similar trends have been observed in the digital asset space in the past.
10x Research notes that the timing of the ETF’s launch may have made things worse.
This coincided not only with the distribution of bitcoins from long-held Mt. Gox, but also with a broader market decline influenced by the poor performance of the U.S. technology sector.
Due to weaker expectations for consumer spending, Alphabet, Tesla and other companies experienced notable stock selling. This has contributed to a more cautious or pessimistic investment outlook.
The impact of these factors is more evident with Ethereum.
Before the ETF’s launch, 10x Research had already rated Ethereum as overbought. This suggested that the market was ripe for a correction. The recent price action seems to confirm this perspective, as Ethereum has struggled despite significant capital flowing into the new ETFs.
Ethereum ETF inflows and their price impact
Investors are paying close attention to Ethereum ETFs despite the recent drop in spot prices. These funds saw net inflows totaling around $106 million on their first day of trading.
BlackRock’s iShares Ethereum Trust, the ETF launched by BlackRock, brought in $266.5 million alone. Bitwise Ethereum ETF followed closely behind with $204 million, followed by the Fidelity Ethereum Fund, which brought in $71 million.
Not all funds saw positive inflows. Grayscale Ethereum Trust saw outflows of $484 million, which is significantly higher than the initial outflows of its Bitcoin counterpart earlier this year.
Ethereum’s price volatility has left many traders with significant losses as the market adapts to new developments, including the launch of ETFs.
A staggering 73,119 traders were active in the last day alone. liquidatedLiquidations related to Ethereum totaled $102.37 million.
The same thing happened with Ethereum. open interestVolume dropped by 3.92%.
