Markets
What to expect on day one as sell-off fears scare some traders
Ether (ETH) has jumped above $3,500 ahead of spot exchange-traded funds (ETFs) due to launch on Tuesday, which some observers say could see moderate inflows in the first few weeks.
“Market participants are also closely monitoring Grayscale’s $9 billion ETH Trust, as there are concerns that potential selling pressure at Grayscale could counteract the positive effects of new inflows, potentially putting downward pressure on the market,” Vivien Wong, a Liquid Funds partner at HashKey Capital, wrote in an email to CoinDesk on Tuesday.
Wong’s HashKey helped launch one of the Ether ETFs in Hong Kong. Inflows are expected to hit $3 billion in the first six months of U.S. trading, citing bitcoin’s market cap of 30% of Ether’s and the lack of staking.
Another cause for concern is the inflation rate of Ether, which increases the supply of tokens on the open market.
“In the past month, ETH supply has increased by about 60k ETH, contrary to expectations,” Wong said. “While ETH supply has decreased by about 300k ETH since the merger, continued inflation at this rate could reverse this decline within six months, potentially turning ETH back into an inflationary asset.”
ETH reversed losses from Monday’s trading session to gain 0.57% over the past 24 hours, CoinGecko data shows, outpacing the overall performance. CoinDesk 20 (CD20) index, which fell by 1.7%.
On Monday, eight issuers, including BlackRock, received approval for their latest S-1 filings from the U.S. Securities and Exchange Commission.
Market watchers are debating whether the ETFs can mirror the performance of their bitcoin counterparts, which were issued in January and have since attracted more than $17 billion in net inflows.
“The big question is, will ETH ETFs outperform Bitcoin ETFs? In technical terms, Ethereum has more utility than Bitcoin with features like liquid staking,” Danny Chong, co-founder of Tranchess, shared in an email to CoinDesk. “ETH ETFs were slow to meet industry expectations when they launched in Hong Kong.”
“However, I believe that with a broader investor base, ETH ETFs should be able to perform better and provide the liquidity we need,” Chong added.