The debut of spot Ether ETFs was more than $1 billion in trading and then the price floor fell. Why were Ether ETFs greeted by a price drop? Investors and traders had just been through the introduction of spot price Bitcoin ETFs and the healthy price recovery that accompanied it. Much the same was expected when spot Ether ETFs began to trade. This all started off with a bang as more than billion dollars in trading occurred in the first days of spot Ether ETF trading and traders either lost interest or became scarred. What happened?
Crypto Is Not Isolated From the Real World
Sometimes it may seem as though cryptocurrencies like Bitcoin, Ether, and the rest operate in their old separate world. The dramatic price swings over the years have not necessarily all been associated with anything except speculation within the crypto ranks. And then we see that crypto is correlated with the Nasdaq and the whole stock market as the Fed raises or lowers interest rates. One of arguments for holding Bitcoin or other cryptocurrencies virtually forever has been that it is inflation proof and a store of value that is better than the US dollar, gold, the stock market, real estate, etc. However, when the Federal Reserve started to raise interest rates the value of cryptocurrencies tanked along with other markets. Thus, it is pretty clear that crypto is not isolated from the real world. Thus, it is useful to look outside of the crypto world as well as within it to explain things like the price of Ether falling when a new trading and investing opportunity like spot Ether ETFs becomes available.
What Does the Ether Spot Price ETF Debut Tell Us?
When spot price Ether ETFs became available Bloomberg reported how there was immediately over $500 million in trading volume of Ether with subsequent trading going over $1 billion in dollar value. This was the 23rd of July, 2024. However the price of Ether slid from $3478 to $3448 the first day and then down to $3168 the next. Over the following fours days Ether’s price recovered a little to $3308 but is still down from where it traded immediately before spot price ETFs became available. All told, the market saw Ether lose $340 million in cash outflows in its first week of ETF trading.
Courtesy Google Finance
Does Ether Follow the Nasdaq Like Bitcoin Does?
Interestingly, the Nasdaq followed the same price route as Ether from the 23rd of July over the next several days. It traded as high as 18,114 on the 23rd of July, fell to 17,180 on both the 24th and 25th and then recovered to 17,448 by midday on the 29th. Bitcoin experienced the same initial price drop on the 23rd but then rallied to higher prices before falling back to roughly the price range of the week before. Since we noted how Fed rate increases brought on crypto winter, it seems appropriate to look at Fed rate expectations for hints about why the Nasdaq and Ether are gyrating up and down. It turns out that inflation has come down to the point where most folks think the US Federal Reserve will start to reduce interest rates by September, 2024. “Betting” on rate decreases and when they will occur is, in our opinion, the most likely source of fluctuations in markets in the near term.
What Will the Presidential Election Do to Ether?
In the near term markets jump up and down due to shifts in investor and trader sentiment. Over the longer term they are governed by fundamentals like the economy, political situations, and foreign issues like wars. An interesting thing is happening as the 2024 presidential campaign plays out. Donald Trump who once said the Bitcoin and the rest of crypto are “not real money” and are based on “thin air” is now cozying up to the crypto world in search of campaign contributions and votes. He is promising to not only ease crypto regulations but to essentially shut down regulators like the SEC and make the USA the crypto capital of the world and the Bitcoin mining “powerhouse.” Trump followed through on his promises to his supporters when in the White House by doing things like appointing Supreme Court judges that would restrict the right to abortion. There is no reason to believe that he would not also reward crypto supporters if he regains the White House.
Some may think that a deregulated crypto world would thrive. However, those folks need to think back to crypto winter and the devastation wrought by modern day robber barons in the crypto world having free reign with other people’s money!