Following the launch of the Spot Ethereum ETFs, the price of Ethereum has been facing unexpected struggles. Despite the initial excitement surrounding the ETF launch, the second-largest cryptocurrency by market cap has seen a decline in value, losing around 10% since the trading began on Tuesday, July 23. This decline may continue, according to an analysis from Matrixport.
Markus Thielen, Head of Research at Matrixport, highlighted several reasons for the decline in the price of Ethereum. One key factor was the outflows from the Grayscale Ethereum fund, which holds approximately $9 billion in ETH. The high management fees of Grayscale compared to competitors offering lower fees have led to significant outflows, amounting to $481 million on the first day alone and $326 million on the following day.
In addition to the outflows from the Grayscale ETH fund, the distributions from Mt. Gox also contributed to selling pressure in the crypto market around the time of the Spot Ethereum ETFs launch. This additional selling pressure further negatively impacted the price of Ethereum, pushing it below $4,200.
Thielen also pointed out that the Ethereum price may have reached its peak, using the daily stochastics indicator as a guide. A score of 92% in the days leading up to the ETF launch indicated that Ethereum was in overbought territory, making it bearish for the price. As the stochastic indicator value decreased slightly to 87%, there is still room for further decline before the price stabilizes.
Considering the recent rally, potential overhang from Mt. Gox, the US earnings season, and weak seasonals for August and September, Thielen suggested that it might be wise to maintain a bearish stance on Ethereum for the time being. The combination of these factors could continue to weigh on the price of Ethereum in the coming weeks.
The launch of the Spot Ethereum ETFs has not had the intended positive impact on the price of Ethereum. Factors such as outflows from the Grayscale ETH fund, Mt. Gox distributions, and technical indicators pointing to a potential peak have contributed to the decline in Ethereum price. Investors should closely monitor these developments and adjust their strategies accordingly to navigate the current market conditions effectively.