The second day of trading for spot Ethereum ETFs saw a significant shift in investor behavior compared to the first day. More than $133 million were withdrawn from the largest financial vehicles, causing a ripple effect in the market. This mass exodus led to a massive price drop in the underlying asset, driving it down by 10% in a single day. The initial reports indicating that the approvals might result in a sell-the-news moment seemed to be coming true.
While the spot Ethereum ETFs from BlackRock and Bitwise had an impressive influx of funds on the first day, the trend reversed on the second day. Grayscale’s product, ETHE, faced a massive $326.9 million in outflows, while other ETFs struggled to attract investors. Only Fidelity’s FETH managed to buck the trend with $74.5 million in inflows. This discrepancy among ETFs highlighted the volatile nature of the market and the unpredictability of investor sentiment.
The underwhelming performance of the newly launched ETFs had an immediate effect on Ethereum’s price. The asset plummeted from nearly $3,500 to a multi-day low of $3,130, representing a 10% decline. Despite a slight recovery, Ethereum was still down by 8% for the day, trading below $3,200. The market volatility triggered by the ETF withdrawals resulted in over $100 million in long ETH positions being liquidated, accounting for a significant portion of the total trading volume.
Leading up to the launch of spot Ethereum ETFs, there were speculations that the event might turn out to be a sell-the-news moment. These concerns were validated by the market reaction on the second day of trading, where significant outflows and price drops indicated a lack of sustained investor interest in the new financial products. The sell-the-news scenario underscored the importance of carefully evaluating market dynamics and investor sentiment before making investment decisions in a rapidly evolving landscape.
The impact of spot Ethereum ETFs on market volatility is evident from the withdrawal trends, discrepancies among ETFs, price impact, and the sell-the-news scenario. Investors and traders must navigate these challenges with caution and adapt to changing market conditions to capitalize on emerging opportunities in the crypto space.