Ethereum ETFs Debut: What’s Behind the Drop in ETH’s Value?

The launch of Ethereum (ETH) spot ETFs in the U.S. did not result in a significant price surge for ETH as anticipated, with prices actually declining post-approval and launch. To understand the current state of Ethereum, it is crucial to delve into the technical analysis and price action of the cryptocurrency.

Following its peak at $4093.92 in 2024, ETH faced a bearish divergence, leading to the formation of a falling wedge pattern. This pattern broke out after news of a potential ETH ETF approval. Despite attempts to retest the all-time high, ETH entered a parallel regression channel and briefly dropped below the 200-day EMA support level, causing concern. However, ETH has since recovered and is now testing the 200-day EMA support, indicating a potential rebound. Failure to hold this support level may see ETH revisiting the major demand zone between $2844 and $2923.

Traditional indicators present mixed signals, with the MACD showing a bearish turn and the RSI remaining neutral. The short-term trend is likely dependent on market sentiment regarding the ETF inflow/outflow for ETH. Maintaining support levels could signal a bullish divergence in the near future.

Several key events triggered the correction in Ethereum’s price:

1. **Sell-the-News Event**: Investors may have engaged in profit-taking following the ETF approval, resulting in a decline in ETH prices.
2. **Outflows from Grayscale Ethereum Trust**: Large outflows from ETHE on the first day of ETF trading offset the buying demand from new ETFs.
3. **Liquidation of Long Positions**: Over $94 million in long ETH positions were liquidated post-ETF launch, adding to selling pressure.
4. **Broader Market Downturn**: ETH’s price drop coincided with a broader decline in crypto and US-European stock markets.
5. **Delayed Inflows**: While ETFs attracted some net inflows, the full impact may take time to materialize.
6. **Stagnant Fundamentals**: Analysts suggest Ethereum’s fundamentals have stagnated or declined compared to Bitcoin, potentially leading to increased selling pressure.

In summary, a combination of factors, including the sell-the-news event, outflows from ETHE, liquidations, macroeconomic influences, and delayed inflows, contributed to the decline in ETH price post-ETF launches. Despite this, analysts are optimistic about ETH’s potential for a positive trend in the upcoming weeks.