Ethereum (ETH) Experiences Price Decline: What Is the Reason?
Ethereum’s primary token, Ether (ETHUSD), has experienced a significant drop in value shortly after the introduction of spot Ethereum ETFs in the United States. The price of Ether has decreased by roughly 8.75% over the past 24 hours, settling around $3,170 on July 25. This decline, following the launch of eight spot Ether ETFs on the New York Stock Exchange, has erased nearly two weeks of previous gains, indicating a “sell-the-news” response within the Ethereum market.
The “sell-the-news” strategy involves investors selling assets immediately after a highly anticipated event or news release, regardless of positive outcomes, as the event may have already been factored into prices beforehand. This phenomenon is not unique to Ether, as Bitcoin (BTCUSD) similarly experienced a decline following the launch of nine spot ETFs in the US earlier in the year.
The drop in Ether’s value was further exacerbated by $113.3 million in outflows from its spot ETFs on their second day of trading on July 24, primarily driven by significant withdrawals from Grayscale’s Ethereum Trust. Despite this, seven out of the eight newly launched spot Ether ETFs saw net inflows, with the Fidelity Ethereum Fund (FETH) and the Bitwise Ethereum ETF (BITW) attracting the most investments.
Conversely, BlackRock’s iShares Ethereum Trust (ETHA) saw reduced inflows on July 24, while Grayscale Ethereum Trust (ETHE) experienced substantial outflows of $326.9 million due to its relatively higher fee structure. In contrast, Grayscale’s Ethereum Mini Trust (ETH), with a lower fee of 0.15%, received $15.1 million in investments on the same day, indicating a shift of capital from higher-fee options.
The recent decline in Ether’s value coincides with the ongoing Bitcoin reimbursements by Mt. Gox to its creditors and a downturn in megacap technology shares. Crypto exchanges Kraken and Bitstamp have initiated repayments to approximately 127,000 Mt. Gox creditors, who are owed over $9.4 billion in Bitcoin, potentially introducing sell-pressure into the market after a prolonged wait for fund recovery.
Ether’s 30-day average correlation coefficient with Bitcoin stands at approximately 0.90, highlighting its tendency to mirror the market trends of the leading cryptocurrency, contributing to its current price decline. Additionally, a growing risk aversion sentiment and a tech market selloff have further dampened Ether’s prices, with traders feeling the impact of a negative market sentiment across asset classes.
The unexpected decline in the Ethereum market, following the launch of ETFs, has led to significant long liquidations in the Ethereum futures market, amounting to $103.65 million in the past 24 hours, the highest across the crypto market. This liquidation process triggers a chain reaction of selling pressure, driving prices down and leading to further long liquidations, intensifying the downward momentum.
From a technical perspective, Ether’s losses are part of a correction phase that began after testing the upper trendline of its descending channel pattern. Similar pullbacks have occurred in recent months, with a potential downside target around $2,850, serving as a strong long-term support level if historical patterns repeat. It is important to note that this article does not offer investment advice or recommendations, and readers should conduct their own research before making any financial decisions.
