The recent approval of Bitcoin spot ETFs by the U.S. Securities and Exchange Commission (SEC) marked a significant milestone, boosting optimism that an Ethereum spot ETF could soon follow. However, market observers are questioning whether Ethereum might face selling pressure similar to Bitcoin’s post-ETF experience.
After Bitcoin spot ETFs went live, BTC initially surged to $49,000 but soon reversed, dropping below $39,000 within two weeks—a decline of over 11.6%. A major factor behind this pullback was profit-taking from Grayscale Bitcoin Trust (GBTC), which saw its long-standing discount narrow to zero amid high management fees. Data from Arkham Intelligence shows Grayscale moved over 113,000 BTC, worth more than $4.5 billion, out of its wallets since January 11.
Grayscale’s Ethereum Holdings and Market Impact
According to official Grayscale data, the firm currently holds 2.96 million ETH, valued at approximately $6.058 billion. If an Ethereum spot ETF is approved, and Grayscale’s Ethereum Trust (ETHE) behaves similarly to GBTC, the market could experience substantial selling pressure.
This scenario raises concerns about a potential short-term drop in ETH’s price as investors might capitalize on the ETF conversion event to realize gains, especially given ETHE’s current structure.
Is Now a Good Time to Consider ETHE?
For long-term investors, the current discount in Grayscale’s Ethereum Trust (ETHE) might present an opportunity. At the time of writing, ETHE trades at a negative premium of around -16.49%. If an Ethereum spot ETF is approved in the future, this discount could narrow, offering upside for those who enter at a lower cost.
It’s worth noting that some investors benefited from buying GBTC at a discount before its ETF conversion. However, whether the same pattern repeats with ETHE depends on multiple factors, including overall market sentiment and Ethereum’s price trajectory post-ETF.
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Another factor that may support Ethereum’s value is the upcoming Dencun upgrade. This update introduces EIP-4844 (Proto-Danksharding), which aims to temporarily store transaction data and enhance Ethereum’s data availability. This is expected to significantly reduce gas fees on Layer 2 networks, potentially driving greater adoption and adding upward momentum to ETH’s price.
Frequently Asked Questions
Why did Bitcoin’s price drop after the spot ETF approval?
Bitcoin faced selling pressure primarily from GBTC investors who had been holding shares at a discount. Once the ETF launched, many chose to take profits, leading to increased selling activity in the short term.
Could the same happen to Ethereum?
It is possible if Grayscale’s ETHE experiences large outflows after ETF conversion. However, Ethereum’s market dynamics and the timing of upgrades like Dencun may influence overall price action.
What is the significance of the Dencun upgrade?
The Dencun upgrade introduces EIP-4844, which improves data storage efficiency on Ethereum. This can lower transaction costs on Layer 2 networks, enhance scalability, and make the network more attractive for users and developers.
Is investing in ETHE at a discount a good idea?
It may offer a opportunity for investors who believe an Ethereum ETF will be approved and that the discount will narrow. However, like all investments, it carries risk and depends on broader market conditions.
How does Grayscale’s ETF conversion affect ETH supply?
Conversion to a spot ETF allows easier creation and redemption of shares, which may improve market efficiency. Large sell-offs, however, could temporarily increase market supply and put downward pressure on price.
Should I wait to buy ETH until after the ETF decision?
Market timing is difficult. While short-term volatility may occur, long-term investors may focus on Ethereum’s fundamental value and technological developments rather than trying to predict ETF-related price movements.