The U.S. Securities and Exchange Commission (SEC) recently approved several Bitcoin spot ETFs, leading the market to believe that an Ethereum spot ETF will also be introduced this year. But if an Ethereum spot ETF is approved, will it experience a similar decline to Bitcoin?
(Previous briefing:
Bitcoin falls below $40,000 culprit? Insider: FTX sells nearly $1 billion of grayscale GBTC)
(Background information:
SEC delays decision on Fidelity’s “Ethereum spot ETF”, Bloomberg analyst reveals key timing)
Table of Contents:
BTC continues to decline after ETF approval
Will ETH fall after the approval of an Ethereum spot ETF?
Is now the right time to buy ETHE?
The U.S. Securities and Exchange Commission (SEC) recently approved several Bitcoin spot ETFs in one go, marking a milestone event in the acceptance of cryptocurrencies by traditional finance. This has also raised optimistic expectations that an Ethereum spot ETF will also be introduced in the future.
Related reading:
Bloomberg analyst: Ethereum spot ETF expected to be listed “this year”! 70% chance of SEC approval in May
BTC continues to decline after ETF approval
Initially, with the launch of a Bitcoin spot ETF, the market believed that under regulatory compliance, traditional financial institutions would enter the market faster, and BTC quickly surpassed the $49,000 mark. However, BTC did not stabilize and quickly declined, falling below $39,000 at one point, with a decline of 11.6% within two weeks!
The market generally believes that the continued decline is related to the Grayscale Bitcoin Trust (GBTC) trading at a discount to its net asset value and the high management fees, causing investors to take profits. According to the latest data from Arkham Intelligence, Grayscale has transferred nearly 113,000 BTC, worth over $4.5 billion, from its wallet addresses since the 11th.
Will ETH fall after the approval of an Ethereum spot ETF?
According to official data from Grayscale, they currently hold approximately 2.96 million ETH, with a total value of about $6.058 billion. If Grayscale’s Ethereum spot ETF replicates the situation with Bitcoin, then once an Ethereum spot ETF is approved, the Ethereum price may also be impacted.
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Grayscale cryptocurrency holdings. Image source: CoinAnk
Is now the right time to buy ETHE?
On the other hand, if you are interested in long-term investment, now may be a good time to invest in the Ethereum Trust (ETHE). According to ycharts, the current premium rate for ETHE is 16.49%. If the Ethereum spot ETF is approved as expected by the market this year, the discount may present a good opportunity for investment. (Investors who bought GBTC during a discount have gained considerable profits, but whether this will be replicated in the case of Ethereum remains to be observed, considering the price of the Ethereum spot ETF and whether it will continue to rise)
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Another potential positive factor is the long-awaited upgrade of Dencun, which plans to introduce the EIP-4844 (protodanksharding) solution for “temporary” storage of transaction data, enhancing Ethereum’s data storage capacity. This has the potential to further reduce transaction fees on the second layer network, leading the market to believe that the ETH price will reach a new level in the future.
Related reading:
Dencun upgrade approaching: How will the new EIP proposal change Ethereum?
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