Ethereum price could see sell-the-news retreat following ETF approval

Ethereum price was in a consolidation phase on Tuesday even as the Securities and Exchange Commission approved ETFs by companies like BlackRock, Invesco, Bitwise, and Franklin Templeton.

The ETH token was trading at $3,500, where it has been stuck in the past few days after rising by 25% from its lowest point this month. 

SEC approves spot Ethereum ETFs

The SEC approved spot Ethereum ETFs this week and expects them to start trading on Tuesday. This is a big event for Ethereum and the ETF issuers since the SEC has often warned that it sees Ether as a security because of its staking features.

Some of the approved ETFs are ETH by Grayscale, EZET by Franklin Templeton, ETHV by VanEck, FETH by Fidelity, and ETHA by Blackrock. Most of these funds have a 0% starting fee, with Blackrock’s ETHA having a smaller 0.12% waiver. 

After that, Grayscale’s ETH will be the cheapest Ethereum ETF, with an expense ratio of 0.15%. The other cheaper funds will be EZET (0.19%), ETHV (0.20%), and ETHW (0.20%).

What are we expecting today for the Ethereum ETFs?

We expect them to begin trading tomorrow. That means we should see a bunch of filings on SEC site today that say the ETFs' prospectuses have gone "effective". Likely after or around market close. Here are the race entrants: pic.twitter.com/AkBxEjBRvv

— James Seyffart (@JSeyff) July 22, 2024

Buy the rumor, sell the news

In theory, Ethereum’s price should have risen after the news of such important ETFs. Besides, Bitcoin rose from below $40,000 in January when the SEC approved spot ETFs and reached a record high of $73,750.

However, there is also a risk that Ethereum will retreat since the ETF approval was in line with expectations. These expectations partly explain why Ether has risen by over 25% from its lowest point this year.

In price action analysis, this situation is known as ‘buy the rumor, sell the news’. It happens when an asset rises in anticipation of a big event and then falls when it happens. 

A good example of this is what happened in 2023 when the SEC partially lost its lawsuit against Ripple. The XRP token rose to $0.9325 that day and then slumped by 60% and bottomed at $0.3821 this month. 

Fortunately for Ethereum, it has formed a bullish flag chart pattern, which is often a sign of continuation. More upside will be confirmed if it rises above the upper side of the flag pattern at $3,570. 

Ethereum also has some solid fundamentals. As Blackrock’s Jay Jacobs noted, the network has a real utility since it is the most popular blockchain network in Decentralized Finance (DeFi), metaverse, stablecoins, and non-fungible tokens (NFT). It has over $79 billion in stablecoins and has already collected over $1.8 billion in fees this year. 

Here's BlackRock's Ether pitch to normies via @JayJacobsCFA: "While many see bitcoin's key appeal in its scarcity many find ethereum's appeal in its utility.. you could think of ethereum as a global platform for applications that run without decentralized intermediaries" $ETHA pic.twitter.com/ffyglfSTiB

— Eric Balchunas (@EricBalchunas) July 22, 2024

Ethereum also has a long track record of beating Bitcoin. It has risen by 1,600% in the past five years, while Bitcoin has jumped by 600%.

Therefore, the same investors who have allocated cash in Bitcoin ETFs like Millenium Management, Susquehanna, and Apollo Global may decide to allocate some to these ETFs. All this is happening at a time when Ethereum balances in exchanges have dropped sharply this year.