Traditional financial institutions continue to expand their presence in the cryptocurrency market. On September 6, Cathie Wood’s Ark Invest filed to launch the first Ethereum spot ETF, a product that would give institutional investors access to the second largest digital asset by capitalization.
However, the ETH price practically did not react to the positive news, continuing to trade in a narrow range. We understand the reasons for what happened using on-chain metrics.
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Institutional Players Bet on Grayscale’s ETHE
At the moment, the share price of Grayscale Investments’ ETHE fund is near its yearly highs, while Ethereum continues to suffer losses. The divergence between these assets is worth examining in more detail, as there are complex market forces at play here.
As you can see in the above graph IntoTheBlockETHE is significantly ahead of spot ETH in terms of profitability. Since the beginning of the year, its share price has soared by more than 140%, significantly reducing the discount to its underlying asset.
Source: IntoTheBlock
Within a month of filing an application for a spot Bitcoin ETF by American investment giant BlackRock, the rate dropped from -56% to -36%. Ark’s application to launch a spot ETF on Ethereum narrowed the gap by another 10%, bringing the value to its lowest since November 2022.
This trend suggests that the market is pricing in a high probability of the ETHE trust converting to an ETF.
FUD in the crypto market has reached record levels
Index Social Volume analytical platform Saintly reports that bearish sentiment has dominated the cryptocurrency market since the beginning of September. Interestingly, even a number of positive news could not reverse the trend, such as Grayscale’s victory in the case against the SEC and an application for a spot ETF on Ethereum from Ark.
However, historical evidence suggests that this may be a sign that a tipping point is approaching. The chart below shows that bear market mentions on social media have outpaced bull market mentions on every trading day since August 31st.
Source: Saintly
A similar situation was already observed on March 8, when the temporary loss of the USDC stemcoin’s peg to the dollar and the collapse of Silicon Valley Bank provoked extreme fear among investors. After this, the price of Ethereum soared by 48% – from $1,430 to $2,120, in just a month.
Ethereum price forecast: continued consolidation around $1600
Given the apathy prevailing in the crypto market, the price of Ethereum is likely to continue to consolidate near the $1,600 mark.
The chart below shows that the asset is sandwiched between two large clusters. The 3.09 million addresses that purchased 5.1 million ETH at an average price of $1,623 give him significant support.
On the other side, there was resistance from 2.9 million wallets that bought 6.5 million tokens at an average price of $1,670. If they decide to exit positions at the break-even point, they could trigger another decline.
Source: IntoTheBlock
In short, at the moment, buyers and sellers are making transactions in a narrow range, in which there is a large concentration of positions.
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2023-09-10 14:24:00
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