Thomas Fahrer, co-founder of Apollo, a company focused on Bitcoin adoption, issued a stark warning about potential market dynamics following the approval of Ethereum spot ETFs. As the market anticipates this new development, Fahrer suggests that the transition may not be smooth for Ethereum.
“The Grayscale Ethereum Trust launched in 2017 and accumulated most of its $9 billion in ETH long before staking existed. These funds will be released now. Expect bloodshed. This will accelerate ETH -> BTC trading. Hold me accountable if I'm wrong. But I doubt it”, Fahrer declared via social media platform
Ethereum ETF Spot – A “Sell the News” Event?
The impending approval of Ethereum spot ETFs, similar to the launch earlier this year of Bitcoin spot ETFs, is expected to convert the $9 billion (approximately 2.94 million ETH) locked in Grayscale's Ethereum Trust (ETHE) into one of these ETFs. Historical precedent with Bitcoin suggests potential volatility; After the approval of Bitcoin spot ETFs, Bitcoin saw a drop in value of more than 20% in 12 days amid massive sell-offs linked to similar conversions.
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One of the main reasons why the approval of the BTC spot ETF turned out to be a “news sell” event was Grayscale’s transition from an Ethereum Trust to a spot ETF. Until now, Grayscale Bitcoin Trust (GBTC) saw outflows of more than 50% of its BTC holdings. And ETHE could be strengthened by the fact that staking ETH is a lucrative option to earn additional yield.
Currently, Grayscale holds over $9 billion in locked Ethereum that cannot be sold or traded until the ETF is operational. If approved, this large amount of Ethereum will suddenly become liquid, which could lead to market sell-offs if initial demand does not meet the volume of outflows from Grayscale's new ETF.
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Julio Moreno, head of research at CryptoQuant, Underlines a critical market indicator that could suggest that the market has already started to react. “It appears the market has already priced in approval of the Ethereum spot ETF. Grayscale's ETHE discount to ETH has narrowed significantly in recent days. The same thing happened between GBTC and Bitcoin as the Bitcoin Spot ETF approval was close,” Moreno noted via X.
Although the short-term impact could reflect periods of turbulence observed during the period Bitcoin ETF Launch, the long-term implications for Ethereum could be different. Observers note that despite the initial declines seen in Bitcoin's valuation post-ETF, the introduction of a spot ETF was ultimately beneficial, leading to greater market acceptance and a price surge.
“BTC rose 75% in 63 days after spot ETF approval. If ETH follows the same trend (if approved), that would take it to $6,446 by July 23,” crypto analyst Miles Deutscher. note.
At press time, ETH was trading at $3,676.
![Ethereum Price](https://www.newsbtc.com/wp-content/uploads/2024/05/ETHUSD_2024-05-24_10-06-21.png?resize=3628%2C1675)
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