Ethereum Spot ETFs Launch and Market Impact Analysis
On July 23rd, spot ETFs on Ethereum were launched in the USA. This event caused the ETH/BTC exchange rate to drop as funds from the ETHE trust flowed into the market. Over the past three days, it lost $1.2 billion in investments, resulting in a net cumulative inflow into spot funds of -$179 million.
ETHE was initially a trust fund whose shares had been trading at a significant discount to the underlying asset in recent years. When it became clear that the SEC would approve applications for an altcoin ETF, investors began buying up shares. As a result, the price difference between the shares and Ethereum quickly vanished.
Converting the fund into a spot ETF unlocked the assets, and investors began selling shares and locking in profits. A similar situation occurred when the GBTC trust fund was converted in January—Bitcoin dropped by 21%, despite a significant inflow of investments into the newly created ETFs.
In the 6.5 months following the launch of the Bitcoin ETF, GBTC lost 56.2% of its capital, shrinking to 271.2 thousand BTC. If ETHE loses investments at the same rate (which is happening), 1.64 million ETH worth $5.3 billion will hit the market in six months.
The main question is whether the inflow into other Ethereum ETFs will compensate for the outflow from ETHE. Optimistic forecasts estimate an annual inflow of $10 billion or $5 billion in the first half-year, which would simply neutralize the negative impact of Grayscale. However, the base and pessimistic estimates are much more modest. For example, JPMorgan estimates that by the end of the year, the inflow will not exceed $3 billion if the SEC does not allow staking for ETFs.
In that case, the ETH/BTC exchange rate will continue to decline in the medium term.
While Bitcoin has not seen a single day of negative cumulative investment in US spot funds, the Ethereum ETF figures went into the "red" zone on the second day. As Hegel once aptly noted, "History repeats itself twice: the first time as a tragedy, the second as a farce."