Ether’s Price Fell After Its Spot ETFs Launched. Can It Bounce Back?

Ether (ETH), the underlying cryptocurrency of the Ethereum network, is down about 3% after last week’s launch of spot ether exchange-traded funds (ETFs) on U.S. exchanges. However, prices are still up more than 10% from the days before the surprising reversal in May of Securities and Exchange Commission (SEC) crypto policy that ultimately led to the launch of these ETFs.

The primary reason for the declining ether price since the launch is the legacy Grayscale Ethereum Trust (ETHE). It held roughly $10 billion worth of ether before its conversion to an ETF, and in the week since its conversion has seen outflows of more than $1.8 billion, according to Farside Investors. Analysts have pointed to ETHE’s relatively high fee of 2.5% as one reason investors have ditched the fund, putting downward pressure on ether’s price.

Overall Spot Ether ETF Market Posts Outflows

While much of the funds exiting ETHE have found their way into other spot ether ETFs, the cumulative net outflows for the entire spot ether ETF market currently stand at $406.4 million.

It should be noted that a practically identical situation occurred earlier this year in the spot bitcoin ETF market with the Grayscale Bitcoin Trust (GBTC), with bitcoin suffering a parallel drop of about 10% in the first couple weeks of spot bitcoin ETF trading.

According to MV Capital partner Tom Dunleavy, August is likely to continue as a month of net outflows for spot ether ETFs. “At $1B or so a week in ETH outflows, we should settle in a new steady state for ETH by the end of August,” Dunleavy posted on the social media platform X.

What Happens Next for Ether’s Price?

Crypto market analysts have varying opinions on where ether’s price could be headed after the outflows from the legacy Grayscale Ethereum Trust have subsided.

Previously, Bitwise Chief Investment Officer Matt Hougan made the case that $15 billion will flow into U.S. spot ether ETFs in the first 18 months after they launch. And BlackRock Head of Digital Assets Robert Mitchnik at the recent Bitcoin 2024 conference indicated that large financial institutions may begin soliciting investments into crypto spot ETFs later this year, which aligns with what Bloomberg crypto analyst James Seyffart told Investopedia earlier this month.

Mitchnik stated, “Our client base today, their interest, overwhelmingly, is in bitcoin first. And then, somewhat, in ETH; there’s definitely interest in ETH, too. And there’s very low interest, today, beyond those two.”

That said, the investment case for ether differs from that of bitcoin, and Ethereum’s technology-driven investment thesis has left it open to competition from the likes of Solana, various bitcoin Layer 2 networks, and others, according to former VanEck Digital Asset Strategy Director Gabor Gurbacs.