Thomas Fahrer, co-founder of Apollo, a company focused on Bitcoin adoption, issued a stark warning about potential market dynamics following the approval of a spot Ethereum ETF. As the market anticipates this new development, Fahrer suggests that Ethereum’s transition may not be smooth.
“The Grayscale Ethereum Trust launched in 2017 and has amassed most of $9 billion worth of ETH long before staking even existed. These funds are now unlocked. Expect a bloodbath. ETH -> BTC transactions are accelerated. If I’m wrong, hold me accountable. But I doubt it,” Fahrer declared via social media platform X.
Spot Ethereum ETF – “Sell the News” Event?
With the impending approval of a spot Ethereum ETF, similar to the launch of the spot Bitcoin ETF earlier this year, $9 billion (approximately 2.94 million ETH) deposited in the Grayscale Ethereum Trust (ETHE) is expected to be converted to such an ETF. Bitcoin’s historical precedent suggests potential volatility. Following the approval of the Spot Bitcoin ETF, Bitcoin lost more than 20% of its value within 12 days due to a significant sell-off due to similar conversions.
Related Reading
One of the main reasons why the spot BTC ETF approval turned out to be a “sell the news” event is because Grayscale switched from the Ethereum Trust to a spot ETF. So far, Grayscale’s Bitcoin Trust (GBTC) has seen over 50% of its BTC holdings leaked. And ETHE may be strengthened by the fact that ETH staking is a profitable option to earn additional profits.
Currently, Grayscale holds over $9 billion of locked Ethereum that cannot be sold or traded until the ETF becomes operational. If approval passes, this large volume of Ethereum could suddenly become liquid, potentially leading to a significant market sell-off if initial demand does not meet the outflow of Grayscale’s new ETF.
Related Reading
Julio Moreno, head of research at CryptoQuant, highlighted important market indicators that may suggest that the market is already starting to react. He said, “It appears the market has already priced the approval of an Ethereum spot ETF. Over the past few days, Grayscale’s discount of ETHE to ETH has decreased significantly. The same thing happened between GBTC and Bitcoin as the Bitcoin Spot ETF gets closer to approval,” Moreno commented via X.
While the short-term impact may reflect the turbulent times seen during the launch of the Bitcoin ETF, the long-term impact on Ethereum may vary. Observers note that despite the initial downturn seen in Bitcoin’s valuation following the ETF, the introduction of spot ETFs was ultimately beneficial, increasing market acceptance and leading to a surge in price.
“BTC rose 75% in 63 days after spot ETF approval. If ETH follows the same trend (if approved) it will be at $6,446 by July 23,” said cryptocurrency analyst Miles Deutscher.
At press time, ETH was trading at $3,676.
Featured image created with DALL·E, TradingView.com chart