As a crypto investor with some experience under my belt, I’m keeping a close eye on the Ethereum market following the potential approval of spot Ethereum ETFs. The warning issued by Thomas Fahrer, co-founder of Apollo and a Bitcoin adoption expert, has caught my attention. His past experience with Grayscale’s Ethereum Trust (ETHE) and its upcoming transition to an ETF is concerning.
As a researcher focusing on cryptocurrency markets, I’d like to share some insights from Thomas Fahrer, co-founder of Apollo, a company dedicated to promoting Bitcoin adoption. Fahrer has raised concerns about the potential market repercussions following the approval of spot Ethereum Exchange-Traded Funds (ETFs). With this anticipated development, Fahrer believes that the shift for Ethereum might not be an effortless process.
As a crypto investor, I’ve observed that the Grayscale Ethereum Trust was established back in 2017 and amassed around $9 billion worth of Ethereum (ETH) before staking became an option. With the recent unlocking of these funds, there’s a strong possibility of a significant sell-off, which could potentially accelerate the ETH to Bitcoin (BTC) trading trend. Keep me accountable if I’m mistaken, but I have my doubts. #CryptoInvestorConfessionals
Spot Ethereum ETFs – A “Sell The News” Event?
It is anticipated that the imminent acceptance of Ethereum Exchange-Traded Funds (ETFs) with underlying spot Ethereum, much like the launch of Bitcoin ETFs earlier this year, will result in the $9 billion (around 2.94 million ETH) held in Grayscale’s Ethereum Trust being transferred to such an ETF. Historical data from Bitcoin indicates that volatility may ensue; following the approval of spot Bitcoin ETFs, Bitcoin underwent a more than 20% decrease in value within 12 days due to substantial sell-offs triggered by similar conversions.
As an analyst, I would interpret the situation as follows: The approval of the spot Bitcoin ETF was anticipated by many in the market, and Grayscale’s transformation from an Ethereum Trust (ETHE) to a spot Bitcoin ETF (likely to be named a spot BTC ETF in this context) came as unexpected news. Prior to this transition, Grayscale’s Bitcoin Trust (GBTC) had seen significant outflows, with more than half of its Bitcoin holdings leaving the trust. The allure of Ethereum staking and the potential for earning additional yields might have contributed to these outflows from GBTC.
At present, approximately $9 billion worth of Ethereum is held by Grayscale in a trust, preventing it from being sold or exchanged until their Ethereum ETF becomes functional. In case the approval for this ETF is granted, this significant amount of Ethereum could suddenly be made available for trading, possibly resulting in significant market sell-offs if the initial demand fails to match the volume of assets that may flow out from Grayscale’s new Ethereum ETF.
Julio Moreno, the research chief at CryptoQuant, pointed out a significant market sign that could indicate an reaction from the market has started. He stated, “It appears that the market has already factored in the Ethereum spot ETF approval. The difference between Grayscale’s ETHE price and Ethereum’s price has noticeably decreased over the past few days. This was also observed with GBTC and Bitcoin as the Bitcoin Spot ETF approval approached.”
As a crypto investor, I’ve noticed that the current market turbulence bears some resemblance to the chaos that followed the launch of the Bitcoin ETF. However, it’s important to remember that the long-term consequences for Ethereum could be distinctly different. Some analysts argue that although Ethereum experienced initial dips in value post-Bitcoin ETF, the eventual introduction of a spot Ethereum ETF could lead to increased market acceptance and a subsequent price surge, similar to what we saw with Bitcoin.
Crypto analyst Miles Deutscher pointed out that Bitcoin surged 75% in just 63 days following the approval of a spot ETF. If Ethereum follows this pattern upon receiving approval, its price would reach approximately $6,446 by July 23rd.
At press time, ETH traded at $3,676.
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2024-05-24 11:28