- Despite the recent approval of spot Ether exchange-traded funds (ETFs) by the U.S. SEC, Ether’s price has shown only modest movement because the anticipation of the approval was already factored in, and the ETFs have not yet launched.
- Analysts predict significant price movement will occur once the ETFs start trading, though historical patterns and potential outflows from Grayscale’s Ethereum Trust pose cautionary challenges.
The recent approval of spot Ether exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) has generated significant buzz in the crypto community. Despite this landmark decision, the price of Ether (ETH) has shown only modest movements, leaving many investors puzzled. So, why hasn’t ETH surged in response to this news?
Reasons Behind the Lackluster Price Movement
Crypto commentators suggest there are two main reasons for this. Firstly, the anticipation of the approval had already been factored into the price. Crypto commentator Zach Rynes notes that the lack of significant price movement reflects the sentiment that “everyone who wanted to buy the approval already did.” Ether had already surged 29% over the past week following reports that the SEC might approve the ETFs. This suggests that much of the buying interest was already absorbed by the market prior to the official announcement.
Secondly, while the ETFs have been approved, they have not yet been launched. The actual trading of these ETFs will require an approved S-1 filing, a comprehensive document detailing the firm’s financials and risk profile. This process can take weeks to months, meaning the influx of new capital into Ether is still pending. Rynes and other analysts believe the next significant price movement for Ether will come from ETF inflows once trading begins. Crypto research firm Second Mountain echoes this sentiment, predicting a massive capital inflow in the first week, potentially reaching billions.
However, historical data provides a cautionary tale. When spot Bitcoin ETFs were approved in January, Bitcoin’s price initially dropped 15%. It took 30 days for the price to spike 30% to $51,870. This precedent suggests that Ether’s price might not immediately trend upward post-ETF launch.
Concerns and Potential Challenges
Additionally, there are concerns about the impact of Grayscale’s plans to convert its Grayscale Ethereum Trust (ETHE) into a spot Ether ETF. Pseudonymous crypto trader Rho Rider warns that this could lead to significant outflows, similar to what was seen with the Grayscale Bitcoin Trust (GBTC) after the approval of spot Bitcoin ETFs. Since spot Bitcoin ETFs started trading on January 11, GBTC has shed a total of $17.6 billion in assets.
Despite these concerns, some in the crypto community, like independent Ethereum educator Sassal, believe Ether is still undervalued. They argue that the market has had only a short time to price in the ETF approval and that further appreciation is likely as the ETFs begin trading and attracting new investments.
While the approval of spot Ether ETFs marks a significant milestone, the actual impact on Ether’s price may take time to materialize. The anticipation of the approval, the pending S-1 filings, and historical patterns suggest a more complex road ahead for ETH investors. As the market evolves, the true influence of these ETFs will become clearer, potentially offering substantial gains for patient investors.
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