Bitfinex Analysts said Ethereum (ETH) 40% decline following the launch of spot ETH exchange-traded funds (ETFs) in the US is an expected “sell-the-news” reaction.
The latest issue of the “Bitfinex Alpha” Report, Ethereum ETFs face substantial challenges, as outflows weigh on Ether’s performance. This further exacerbates the underperformance of Ether relative to Bitcoin.
The report highlighted the negative net flows of spot Ethereum ETFs — currently at $420 million in outflows — as the main force driving ETH’s price down in recent weeks.
The report said that the recent Japanese rate increases, as well as heavy sales by market-makers like Jump Trading, Wintermute and other traders, had contributed to this downtrend.
Ethereum strength
Reports indicate that fund flows on the Ethereum ETF have fluctuated significantly, leading to the apparent weakness of Ether’s value compared to other crypto markets.
On Aug. 5, the ETH/BTC pair hit its lowest level in over 1,200 days, dropping to 0.0367 — marking a significant decline from its peak in February 2021.
This recent movement further exacerbates the concerns over Ethereum’s relative strength.
Analysts at Bitfinex believe that Bitcoin ETFs are a major factor in this performance underperformance, as they have been able to direct passive flows towards BTC and increase demand. Due to this dynamic, Ethereum ETFs are struggling to maintain the same level investor interest as they try to establish in the market.
It is possible that the persistent decline in ETH/BTC may be due to deeper forces than just the availability of institutional products.
Divergent ETF performance
Ethereum ETFs are showing signs of improvement, especially with Bitcoin. BlackRock’s iShares Ethereum TrustETHA), which recorded over $100 million in inflows on two separate occasions in late July and early August. ETHA’s cumulative inflows reached $977 million as of the end of last week. This shows some resilience against broader market issues.
However, Grayscale’s ETHE’s outflows have been substantial, amounting to over $2.4 billion in total since it was converted into an ETF. This significant outflow reflects a cautious sentiment — or possibly a negative view — among institutional investors toward this specific ETF.
Reports claim that ETHE struggled due to its 20% price discount compared to the underlying ETH value, even a few weeks after the conversion. Arbitrage traders have been taking profit, resulting in this 20% discount. It has continued, despite recent slowdowns.
The rate at which ETHE Grayscale Bitcoin Trust outflows have been much faster.GBTC). On the twentieth trading day after the launch, ETHE assets managed stood at 70.0% compared with pre-launch numbers, and GBTC at 76.3%.
This trend makes it difficult to determine whether Ethereum ETFs are effective in balancing the market between ETH BTC. The underperformance of ETH compared to BTC indicates that there are deeper forces in play than the availability of institutional products.
In this article, we mention a number of things. article
“This article is not financial advice.”
“Always do your own research before making any type of investment.”
“ItsDailyCrypto is not responsible for any activities you perform outside ItsDailyCrypto.”
Source: cryptoslate.com