While the launch of spot Ethereum exchange-traded funds (ETFs) brought optimism to the market initially, it quickly turned into a sell-off, causing a notable decline in the price of Ether.
On the first day, ETFs saw a promising start with net inflows reaching almost $107 million. Yet, this enthusiasm was short-lived.
According to data from Farside Investors, investors withdrew around $133 million from these products on the second day of trading.
On the debut day, BlackRock’s iShares Ethereum Trust (ETHA) led the pack with over $266 million. These flows, combined with additional inflows from seven other Ethereum ETFs, managed to offset significant outflows from Grayscale’s Ethereum ETF (ETHE).
Day-2 decline
The second day saw a different dynamic. Grayscale’s ETHE experienced outflows of nearly $327 million, bringing total outflows to $811 million since the fund’s conversion.
ETHE’s assets under management dropped to $8.3 billion from $9 billion before the launch.
In contrast, Grayscale’s Ethereum Mini Trust (ETH), a lower-cost product, recorded approximately $46 million in inflows.
Other Ethereum ETFs also saw varied results. Bitwise’s Ethereum ETF (ETHW) reported only $29 million in net inflows. While VanEck’s Ethereum ETF (ETHV), Franklin’s EZET and Invesco/Galaxy’s QETH also reported gains, 21Shares’s Core Ethereum ETF (CETH) saw no inflows.
According to SosoValue data, Grayscale’s ETHE recorded the largest outflow at $326.86 million. Fidelity’s FETH led inflows with $74.46 million, followed by Grayscale’s Ethereum Mini Trust with $45.93 million, Bitwise ETHW with $29.64 million, and VanEck ETHV with $19.84 million.
BlackRock’s ETHA saw a significant decrease, with net inflows of $17.44 million, down from $266.55 million on Tuesday.
Overall market impact
Spot Ethereum ETFs dropped about $951 million in trading volume on Wednesday, down from $1.05 billion on Tuesday.
The nine funds had recorded net inflows of around $106.78 million on Tuesday.
Meanwhile, 11 spot Bitcoin ETFs in the US saw approximately $44.51 million flowing into the funds on Wednesday.
Grayscale’s GBTC was the only Bitcoin ETF to record negative flows, with a net outflow of $26.22 million.
BlackRock’s IBIT led inflows with $65.99 million, followed by Ark and 21Shares ARKB’s net inflows of $3.29 million and Fidelity FBTC’s $1.44 million.
Ethereum price reaction
The total crypto market cap declined nearly 4% in the last 24 hours, led by Ethereum ($ETH), to hover around $2.42 trillion.
Ethereum’s price dropped as much as 8% to a daily low of about $3,156 but rebounded to around $3,164 at the time of writing.
The decline resulted in liquidations of nearly $260 million from long traders, with Ethereum traders being the most impacted.
This sell-off trend follows a familiar pattern seen in previous crypto ETF launches, including spot Bitcoin ETFs.
The founder of 10x Research, Markus Thielen, explained that many traders “anticipated Ethereum ETFs would capture 20% of Bitcoin ETF inflows”.
However, they overlooked potential billion-dollar outflows from Grayscale and the tendency for exchange listings to trigger ‘sell the news’ reactions.
Additionally, the crypto market is entering a seasonally weak period.
The launch of spot Ether ETFs also coincided with the first $BTC distributions from Mt. Gox, adding to the selling pressure.
The 10x Research report highlighted that Ethereum might be the weakest link, with stagnant or declining fundamentals such as new users and revenues.
While $BTC enjoys the status of “digital gold”, Wall Street traders struggle to define $ETH’s unique value proposition. The report added-
“While tech investments are often risky, Wall Street people usually don’t place bets on things they don’t understand.”
The Ethereum price could continue dropping in the near term due to significant net cash outflows from US-based spot Ether ETFs and major US stock liquidations.
According to crypto analyst, Sheldon The Sniper, $ETH price could find solid support around $3,097.
From a technical standpoint, Ethereum has established a support level around $2,869.
Additionally, the US Federal Reserve’s upcoming interest rate announcement could impact the market further.
Analysts remain bullish
Despite short-term setbacks, ETF analysts remain optimistic about spot Ethereum ETFs, calling their approval a turning point for the crypto industry.
The President of ETF Store, Nate Geraci, and other industry leaders, are bullish on spot ETH ETFs.
Bloomberg’s ETF analyst, James Seyffart, also emphasised that spot ETH ETFs are bridging the gap between Ethereum and traditional financial markets.
The head of US business at 21Shares, Federico Brokate, stated that the approval by the United States Securities and Exchange Commission signifies broader momentum and adoption of crypto. He pointed out:
“It represents further comfortability with the asset class from the SEC and serves as further proof of crypto’s broader momentum and adoption.”
The founder of the Digital Assets Council of Financial Professionals, Ric Edelman, talked about the different roles of Bitcoin and Ethereum.
While Bitcoin functions as a store of value, Ethereum operates like an escrow account without human interference. This distinction targets different audiences for their respective ETFs.
