Ethereum’s native token, Ether (ETH), has plummeted a day after a spot Ethereum ETF launched in the United States.
Ether suffers from sell news phenomenon
The price of ETH fell by about 8.75% over the past 24 hours, reaching around $3,170 on July 25. This decline came after the launch of eight spot Ether ETFs on the New York Stock Exchange, wiping out nearly two weeks of previous gains and signaling a “news sell” reaction in the Ethereum market.
“Sell-the-news” is a trading strategy where investors sell an asset immediately following a highly anticipated event or press release. This often occurs despite positive news, as the event may have already been priced in during the preceding period.
Related: Ethereum ETF Selloff Foreshadows More Trouble — 10x Research
Bitcoin (BTC) similarly fell in January after nine spot ETFs were launched in the US.
Ethereum ETFs See Net Outflows for Second Day
Ethereum’s decline today was further exacerbated by $113.3 million in outflows from spot ETFs on the second trading day of July 24, largely due to significant withdrawals from Grayscale’s Ethereum Trust.
In particular, seven of the eight newly launched spot Ether ETFs saw net inflows, with the leading Fidelity Ethereum Fund (FETH) and Bitwise Ethereum ETF (BITW) attracting $74.5 million and $29.6 million, respectively.
In contrast, BlackRock’s iShares Ethereum Trust (ETHA), which saw the most inflows on July 23, only raised $17.4 million from investors on July 24.
On the other hand, Grayscale Ethereum Trust (ETHE) experienced a massive outflow of $326.9 million, similar to the withdrawals that occurred after the Grayscale Bitcoin ETF launched in January, due to its relatively high fees. ETHE’s fees are the highest of all at 2.5%.
Nonetheless, Grayscale’s Ethereum Mini Trust (ETH), which has a fee of 0.15%, attracted $15.1 million on July 24, suggesting that traders are pulling capital out of Grayscale Ethereum Trust and seeking opportunities in lower-fee alternatives.
Mt. Gox BTC Refunds, Tech Market Selloff
Today’s Ethereum losses come as Mt. Gox continues to repay its creditors with Bitcoin and big tech stocks plunge.
Cryptocurrency exchanges Kraken and Bitstamp have started repaying approximately 127,000 Mt. Gox creditors who owe $9.4 billion in bitcoin. These creditors have been waiting for more than a decade to get their money back, and it signals potential selling pressure entering the market now.
The 30-day average correlation between Ethereum and Bitcoin is around 0.90, showing that it is more likely to reflect the market trends of major cryptocurrencies. This is the main reason why the Ethereum price is falling today.
As risk aversion grows, the price of ETH is falling further.
On July 24, the U.S. stock market had its worst day since 2022 as big tech stocks tumbled, and the enthusiasm surrounding artificial intelligence began to wane. The sharp decline also dampened sentiment among cryptocurrency traders.
“After a bad night for U.S. equities, cryptocurrencies, like most asset classes, seem to be feeling some of the sentiment spillover,” said Benjamin Celermajer, co-chief investment officer at Magnet Capital.
Ethereum Leads Long Liquidation in Crypto Futures Market
Investors who had been expecting a bull market immediately after the ETF launch were surprised by the “news sell-off” plunge in the Ethereum market.
In particular, the Ethereum futures market saw $136.5 million worth of long liquidations in the past 24 hours, the highest level in the entire cryptocurrency market.
When the market moves against these long positions, the liquidation process triggers the selling of assets. The sudden increase in selling pressure pushes the price down further, triggering more long liquidations, thus amplifying the momentum.
Correct descending channel
From a technical perspective, Ethereum’s losses are part of a correction that began after testing the upper trendline of the prevailing descending channel pattern.
Similar pullbacks have occurred in recent months, with the May pullback correcting more than 25% towards the lower trendline of the channel. If the fractal repeats, ETH price could decline towards the same downside target of around $2,850, which would be strong long-term support.
This article does not contain any investment advice or recommendations. All investment and trading moves involve risk, and readers should conduct their own research when making decisions.