Ethereum ETFs Trail Behind Bitcoin, Caution on Small Caps
The Consumer Discretionary Select Sector Fund (XLY) is experiencing a substantial decline, marking its worst day in over a year. The ETF is currently down 3.5% in late trading, surpassing the 3.4% drop recorded on July 20, 2023, based on data from Dow Jones Market Data. Its year-to-date gain has diminished to 2.4%.
The primary driver behind this downturn is Tesla (TSLA), which plummeted by more than 10% following its earnings report. Tesla holds an 18% weight in the fund. Amazon.com (AMZN), representing 22% of the consumer discretionary ETF, also saw a loss of nearly 3%, impacting the sector. Home Depot (HD), the third-largest holding, experienced a decline of about 2%.
The ETF is currently testing its 50-day moving average, requiring a rebound to revive its upward trend. Further declines below this level would contribute to a negative outlook for the fund.
Ethereum exchange traded funds have shown slower initial results compared to bitcoin. Trading volume for ethereum ETFs exceeded $1 billion on the first day, significantly lower than the approximately $4.7 billion recorded for bitcoin ETFs. According to Alan Goldberg, a crypto analyst at BestBrokers, bitcoin maintains stronger institutional support and market enthusiasm compared to ethereum in the ETF market.
The Securities and Exchange Commission (SEC) has approved eight ETFs, including those for ethereum such as Grayscale Ethereum Mini Trust (ETH), Franklin Ethereum ETF (EZET), VanEck Ethereum ETF (ETHV), and BlackRock’s iShares Ethereum Trust (ETHA). The market capitalization of bitcoin stands at $1.268 trillion, making it the largest cryptocurrency, while ethereum follows as the second-largest with $409.3 billion, as per Statista.
The Russell 2000 index has shown a 2.5% increase amidst declines in the Nasdaq, S&P 500, and Dow Jones Industrial Average. This rise is attributed to optimism regarding lower interest rates and potential policy changes if former President Donald Trump returns to office. However, Scott Wren, senior global market strategist at Wells Fargo Investment Institute, cautions that small caps may face challenges due to potential tariffs and a significant portion of non-profitable stocks within the Russell 2000.
The Roundhill Magnificent Seven ETF (MAGS) has declined by over 5%, marking its worst performance since its inception. The ETF is currently testing its 50-day moving average, with hopes for a rebound to support the Magnificent Seven stocks. Tesla’s market capitalization has dropped by $91.8 billion, while Microsoft, Alphabet, Amazon.com, and Meta Platforms have all shown declines below their 50-day moving averages.
