On January 10, 2024, after a decade of waiting, the first batch of BTC spot ETFs were finally approved by the U.S. SEC and listed. Two months later, on March 14, BTC reached an all-time high of $73,750. Now, with the introduction of the ETH spot ETFs, the world’s second-largest cryptocurrency might have the chance to replicate BTC’s success in the post-spot ETF era. Let’s review BTC’s price movements before and after the listing of its spot ETFs to provide some context for the current situation.
Bullish News Drives Price Up Before Approval
The application for a BTC spot ETF began as early as 2013, but the SEC repeatedly rejected it over the past decade. In 2023, the competition between major applicants and the SEC intensified, with expectations for the approval of BTC spot ETFs reaching new heights, becoming one of the main themes of the crypto market that year.
Throughout this period, several bullish news drove BTC’s price up. For example, BlackRock’s entry into the BTC spot ETF application process in mid-June, and Grayscale’s victory in its lawsuit against the SEC in late August. Even a false news report on October 16 by Cointelegraph, claiming the BTC spot ETF had been approved, caused BTC to spike by around $2,000 in a short time. On October 24, when significant progress was made towards approval, BTC broke $35,000 for the first time since the Terra crash, and continued to rise, reaching $46,000 by January 9, 2024.
“Selling the News” Pulles Price Back
As the saying goes, “buy the rumor, sell the news.” When the BTC spot ETF was approved on January 10, BTC briefly approached $49,000 but did not continue to rise. On one hand, the market faced selling pressure from Grayscale GBTC fund outflows; on the other, many investors chose to “sell the news,” causing BTC’s price to quickly pull back, dropping below $40,000 within just over ten days.
However, in hindsight, this was just a small interlude before the big show.
BTC Reaches New High with Huge Inflows
The selling pressure was temporary, but the connection between crypto and traditional finance had been established. The listing of the spot ETFs attracted more investors, bringing in new funds, increasing liquidity and demand in the BTC market. Additionally, the positive regulatory implications boosted market confidence. After shaking off the short-term pullback, BTC embarked on a 40-day bull run starting in early February.
As of February 28, the net inflow into BTC spot ETFs (including GBTC) reached $7.4 billion, with BTC returning to $60,000 on this day. On March 11, BTC surpassed the $70,000 mark for the first time, and three days later, set a new all-time high of $73,750.
Performance of ETH on Spot ETFs Launch Day
Similar to BTC, ETH’s largest gains in recent months stemmed from the major bullish news of spot ETF approval. On May 21, when the news that SEC was very likely to approve emerged, ETH surged by 20% in one day. However, following the official approval of the ETH spot ETFs on July 22, the price remained relatively stable at around $3,400 as market expectations had largely been priced in.
In the short term, the market still needs to contend with selling pressure from Grayscale ETHE. Fortunately, Grayscale’s Mini Trust ETF can alleviate some of this pressure. Additionally, learning from the BTC experience, the “sell the news” phenomenon might be mitigated this time. Therefore, many believe that ETH’s pullback might not be as severe as BTC’s.
On the first day of listing, ETH spot ETFs had a trading volume exceeding $1.1 billion and a net inflow of over $100 million, showing strong performance and paving the way for more significant funds to enter the market. However, ETH is still not on par with BTC in terms of scale. In addition, ETH’s staking function can’t be realized via ETFs, which might be a X factor. Thus, directly applying BTC’s experience might not be a good idea. Undoubtedly, the listing of spot ETFs is a significant bullish factor for ETH, but its potential remains to be seen and needs further observation.
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The post first appeared on HTX Square.
