Ethereum spot ETF may bring the risk of price decline, and Grayscale may face a repeat of the GBTC sell-off

The U.S. Securities and Exchange Commission (SEC) recently approved several Bitcoin spot ETFs, which is seen as an important development in the traditional financial community’s acceptance of cryptocurrencies. This also triggered the market’s optimistic expectations for the Ethereum spot ETF.

BTC continues to fall after the ETF passes

After the Bitcoin spot ETF was launched, the market originally expected that traditional financial institutions would accelerate their involvement and push the price of BTC to climb to $49,000. However, BTC failed to hold steady and once fell below $39,000 the day before, with a drop of as much as 11.6%, surprising the market.

The market generally believes that the reason for Bitcoin’s continued decline is that investors have taken profits due to the disappearance of the negative premium of Grayscale Bitcoin Trust (GBTC) and high management fees. According to the latest Arkham Intelligence data, Grayscale has transferred nearly 113,000 Bitcoins from its wallet address since the 11th, worth more than $4.5 billion. This movement further intensified market concerns and may lead to further declines in Bitcoin prices.

Will ETH fall after the Ethereum spot ETF is passed?

According to Grayscale’s official data, they currently hold 2.96 million ETH, with a total value of approximately US$6.058 billion. If the situation with the Ethereum spot ETF is similar to that of Bitcoin, the Ethereum price may take a similar hit once the Ethereum spot ETF is approved.

Grayscale cryptocurrency holdings. Image source: CoinAnk

Is now the right time to buy ETHE?

But on the other hand, if you value long-term investment, now may be a good time to buy Ethereum Trust ETHE.

According to ycharts data, the current negative premium rate of Ethereum spot ETF (ETHE) is 16.49%. If the ETF can be approved this year as expected, its discount could also become a good time to enter the market. (Investors who bought GBTC at a discount previously made huge profits, but whether this situation can be replicated in the Ethereum market remains to be seen, because we also need to consider whether the price of the Ethereum spot ETF will continue to rise.)

Another potential benefit is the long-awaited Cancun (Dencun) upgrade, which plans to introduce the EIP-4844 (protodanksharding) solution, which will be used for "temporary" storage transactions Data, enhance the data storage capacity of Ethereum, which has the potential to further reduce the transaction fees of the second-layer network, which makes the market believe that the price of ETH will reach a higher level in the future.

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