Ethereum investors have adopted a risk-off approach as ETH prices plunge. Will the upcoming ETF launch offer market relief?
Ethereum’s Recent Performance
Despite the anticipation of an Ethereum ETF launch by mid-July, Ethereum [ETH] has not been immune to the current market downturn. Since July 1st, ETH has dropped from $3.4K to a low of $2.8K, erasing all gains achieved after the partial ETF approval in May.
Market Sentiment and Possible Factors
Ethereum educator Sassal noted that there are no significant bearish factors other than potential outflows from Grayscale’s ETH trust, ETHE. He stated, “This entire run has now been retraced since the ETFs got approved on May 23rd… The main overhang for ETH right now, in my opinion, is the possible Grayscale ETHE outflows.” Sassal also pointed out that increasing regulatory clarity and likely Fed rate cuts in late 2024 could provide bullish tailwinds for ETH.
Comparative Analysis: ETH vs. BTC
ETH has experienced a steeper decline compared to Bitcoin (BTC). As of the latest data, BTC has dropped about 11% weekly, while ETH has declined by 14%. This disproportionate decline has puzzled some traders, especially with the ETH ETF launch on the horizon. Market observers have attributed ETH’s sharp decline to the lack of a strong narrative and concerns over potential ETHE outflows.
Technical Analysis and Support Levels
ETH’s pullback has reached the golden zone at the 61.8% Fibonacci retracement level, based on the 2024 lows and highs. The 61.8% Fib level ($2.8K) also serves as a daily order block and has been a crucial support level in the first half of 2024. The sustainability of this support level may depend on Bitcoin’s next move.
Market Sentiment and Outflows
Investors’ risk-off approach is further evidenced by significant negative outflows in the derivatives market. Since July 1st, ETH has seen net outflows totaling $4.5 billion, according to Coinglass data, indicating bearish sentiment and possible lukewarm reception to the ETF launch. However, a recent Bloomberg report suggested that crypto market sentiment could improve if the Federal Reserve adopts a dovish stance and implements one or two interest rate cuts.