Ethereum and Bitcoin Spot ETFs: A Closer Look at Market Dynamics 🔍
This year has seen the introduction of spot Ethereum ETFs in the U.S. exchanges, which were rolled out in late July. However, the expected rise in the price of ETH did not materialize as anticipated.
In contrast, following the launch of spot Bitcoin ETFs in January, the value of BTC experienced a notable escalation.
Spot Ethereum ETFs vs. Bitcoin ETFs: An Uneven Performance 📉
The Bitcoin spot ETFs debuted on U.S. exchanges on January 11, 2024. At that time, the price of Bitcoin exceeded $45,000. Yet, just ten days later, it plummeted to below $40,000.
Two significant factors contributed to this decline. First was the common phenomenon of “selling the news,” which occurs after an event that had initially driven prices up. Second was the unexpectedly large liquidation of Bitcoin by Grayscale through its fund (GBTC), which had transitioned into an ETF.
Despite the initial setback, Bitcoin’s price climbed back above $45,000 within a month. Over the following five weeks, it surged to achieve historic highs, surpassing $73,000.
Spot Ethereum ETFs, on the other hand, were launched on July 23, 2024. At that time, the price of ETH stood above $3,400, but within two weeks, it dropped to beneath $2,400.
Similar factors influenced this decline as well, with market reactions to the launch echoing those seen with Bitcoin, including activity from the Grayscale fund (ETHE).
In late August, ETH’s price made a brief recovery, rising above $2,800, but starting August 26, it began to decrease again. By September 6, ETH had momentarily dipped below $2,200.
Ethereum Price Movement in 2024: A Divergence from Bitcoin 📊
The contrast in performance between Bitcoin and Ethereum this year is evident. Since the start of 2024, Bitcoin’s price has risen by 42%, while Ethereum has struggled to maintain the $2,300 mark where it began the year.
Between late February and early March, ETH had mirrored BTC’s ascent, momentarily reaching $4,100. However, throughout May, the two cryptocurrencies continued to experience parallel trends until June. From then on, ETH entered a downtrend that shows little sign of reversing.
In a month, Ethereum’s price fell from $3,800 to $2,900, with a fleeting rebound in mid-July before the launch of the spot ETFs triggered another decline.
A pivotal divergence in price movement came in early August. While Bitcoin exhibited recovery and stability, Ethereum experienced marginal rebounds followed by further reductions.
Misplaced Timing for Ethereum ETFs Launch? ⏰
According to Bitstamp’s CEO for the Americas, Bobby Zagotta, the launch timing for spot ETH ETFs has been suboptimal. He acknowledges that investor expectations have not been met thus far, attributing this situation primarily to the market context.
Zagotta suggests that cryptocurrencies are now perceived as risky assets, and the introduction of Ethereum ETFs coincided with a tough phase for such assets across the market.
While this may hold true for Ethereum and various altcoins, it does not apply as strongly to Bitcoin. For example, compared to early May’s statistics, Bitcoin’s price has remained relatively stable, but Ethereum’s valuation has declined by 23%.
This indicates that many altcoins have been adversely affected by recent market trends, contrasting the resilient position of Bitcoin. Zagotta notes that the current market sentiment is cautious, influenced by uncertainties around upcoming U.S. elections, regulatory challenges, and various socio-political issues.
Market Anticipation: A Potential Shift on the Horizon 🌅
The current market atmosphere suggests a lingering anticipation for a bullish trend. A significant catalyst that could shift market dynamics is the decision regarding interest rates scheduled for September 18, 2024. Although market forecasts have largely priced in a reduction, the extent of this cut remains uncertain.
Moreover, October has historically been favorable for financial markets, particularly within the cryptocurrency sector, as the U.S. presidential elections approach on November 5.
Thus, the stagnant conditions may not persist for much longer, but the direction of any potential movement remains unclear.
Historically, following U.S. presidential elections, substantial bullish runs in the cryptocurrency market have been common, often driven by a weakening dollar. However, when trends appear predictable, unexpected developments can drastically alter outcomes.
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