Ethereum ETF Launch Could Be a ‘Sell The News’ Event: Here’s Why

Key Takeaways

• Spot ETH ETFs are set to launch on July 23.
• Grayscale Ethereum Trust’s (ETH) discount narrowed, indicating trader profit-taking.
• Ethereum is at a critical $3,500 level, with potential for high volatility.

Spot ETH ETFs are set to launch today, July 23, after the SEC approved a rule change for listing these funds. 

Now, one question remains – What will happen to Ethereum’s price after the ETF launch? 

Ethereum Fundamentals 

The Ethereum Exchange Reserve, which tracks  the amount of Ethereum held in exchange wallets, increased from a low of 16.6 million ETH on June 30 to 16.94 million ETH by July 15. Although it dipped slightly afterward, it began climbing again on July 21. As of July 23, the reserve was near its peak, at 16.918 million ETH.

An increase in this metric usually implies selling pressure, as investors deposit money on exchanges to make a sale. 

This is also the case for Open Interest , which increased from a July 8 low of $9.63 billion to a high of $12 billion on July 23. 

Open Interest (OI) is the total number of active positions, including both long and short, on a derivative exchange’s trading pairs. An increase in OI signifies greater liquidity, volatility, and market attention, potentially supporting the current price trend. On the other hand, a decrease in OI indicates that investors are closing their futures positions. This, as a result, could lead to a long/short squeeze due to sudden price movements.

However, Ethereum network activity appears to diverge from this activity, as the number of active addresses  has been downtrend since June 22. 

Although we are seeing a slight rise since its recent low of $303,800 on July 18, it is far from its median point. 

Comparing these charts, we can conclude that the speculation is gearing up, and investors are ready to secure their ETH holding against potential incoming volatility. With network activity declining, the derivatives will likely lead to incoming volatility.

ETH Price Analysis 

On May 17, Ethereum’s price broke out from a descending trendline and climbed to nearly $4,000 by May 27. However, it soon fell back, reaching a low of $2,830 on July 5.

The high on May 27  indicates a potential double-top pattern, suggesting that the subsequent decline could initiate a more extensive corrective phase. Alternatively, the rise may represent the second sub-wave of a three-wave correction, with the decline to July 5 completing this structure.

As of July 23, the crucial level for Ethereum is around $3,500. Should ETH surpass this level and achieve a higher high, it would confirm a five-wave pattern beginning from July 5, indicating a possible larger uptrend. Conversely, failure to break this level and a fall below $3,000 could suggest that Ethereum remains in its corrective phase, potentially targeting levels below $2,800.

If ETH reaches $3,600 and then establishes a higher low above $3,000 during the retracement, it could advance towards $5,000. However, the four-hour chart reveals a bearish divergence between the price and technical indicators.

While ETH has been rising since July 16, forming an upward channel, the four-hour RSI and MACD are trending downward. This typically signifies weakening momentum and could signal an impending reversal.

Considering these factors, along with ETH encountering significant resistance, a rejection seems more probable. This scenario could lead to a potential 14% decline, retracing back to around $3,000.