Ethereum ETFs Greenlit by SEC: Market Reactions and Future Predictions
Summary:
The US Securities and Exchange Commission's (SEC) approval of eight Ethereum ETFs failed to significantly impact Ether's price. However, experts suggest potential outflows from Grayscale Ethereum Trust (ETHE) to the new ETFs due to their greater liquidity and lower costs. While concerns of price impacts due to ETHE outflows remain, lower Ethereum supply and a multitude of other factors add complexity to the market. Nevertheless, the ETF approval has led to a wave of positivity in the market, and predictions point to potential price surges driven by an increased influx of institutional money.
In an unexpected move that shocked the marketplace, the US Securities and Exchange Commission (SEC) approved eight Ethereum ETFs on May 23. Despite this, the news did not significantly impact the price of Ether (ETH). Ether's value increased meagerly following the announcement, but a strong bullish trend is yet to be seen.
Prior to the SEC's decision, Ether's value had surged by almost one-third. However, when signs began to appear that the SEC might reverse its previous decision, concerns over the Grayscale Ethereum Trust (ETHE), with an asset management worth $11 billion, began to heavily influence Ether's price movements.
The fear of a repeat scenario, similar to previous significant outflows from the Grayscale Bitcoin Trust (GBTC), has caused apprehension amongst traders. GBTC experienced outflows of $6.5 billion, or 23% of its assets under management (AUM), following the approval of spot Bitcoin ETFs.
Toni Mateos, co-founder of LAOS Network, anticipates substantial outflows from ETHE to the new ETFs due to the ETF's greater liquidity, narrower spreads, and lower costs. Mateos highlighted a key difference in the significance of these Grayscale products to their respective markets when the spot Bitcoin ETFs got approved. Though ETHE accounts for a smaller percentage of the total market cap, he suggests outflows should be more limited.
In terms of long-term outlook, Mateos, ESG focused investors might prefer the ETH ETF over the BTC ETF which could potentially influence the BTC ETF.
Many factors may temper the ETHE outflows. The GBTC scenario can only offer limited insights due to the distinctiveness of Bitcoin and Ethereum as assets. While the pressures of ETHE outflows are undeniable, limited sell-liquidity due to low Ethereum supply on exchanges may stabilise the market.
Manthan Dave, co-founder of Palisade, concurs with James Toledano, stating that the historically low levels of Ethereum on exchanges may sustain or even raise the price, despite outflows. According to Dave, this scenario often mirrors long-term investment sentiment, indicating a bullish market outlook.
It is, however, pertinent to note Ethereum's market behaviour is multifaceted and influenced by a wide array of factors. Aspects like Ethereum's fee-burning mechanism, the amount of staked ETH, and slow issuance rate are all important considerations.
Moreover, the crypto market's global nature means actions beyond the US can shape the marketplace. Major exchanges like the London Stock Exchange are entering the arena, which could fuel momentum.
Regardless of where experts stand on the inflow-outflow argument, there's a noticeable wave of positivity in the market following the Ethereum ETF approval.
Jess Houlgrave, CEO of WalletConnect, views the approval as a significant confidence booster for the industry, opening up Ethereum to a potentially larger range of buyers. While most speculations point at upward price movements, Oleg Fomenko, co-founder of Sweat Economy, predicts an ETH price surge up to $7,000 in the next three months owing to more institutional money influx via the approved ETFs.
Published At
5/31/2024 4:03:00 PM
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