Bloodgood's Notes #135

Spot Ether ETF launch comment, Bitcoin returns to 2021 ATH, and more

Fundamental Overview

This week, we finally got to see spot Ether ETFs start trading, with nine funds launching on Tuesday. Two of the ETFs are from Grayscale: one being the newly-converted ETHE trust, and the other the Grayscale ETH mini trust with the coveted ticker ETH. The reason behind this is simple: just like with Bitcoin, Grayscale once again opted to have a gigantic fee on ETHE (2.5%), since it started out with $9 billion of assets and that gives them an easy way to extract money from trapped trust holders. Predictably, this leads to a lot of capital exiting ETHE, so their idea was to have the ETH mini trust with the lowest fee of all the ETFs, namely 0.15%, even adding a fee waiver on top of that for the first six months. Long story short: they want to have their cake and eat it too, hoping that the capital that leaves ETHE will go into the mini trust rather than to other issuers.

With that in mind, no one was surprised that ETHE saw outflows to the tune of a few hundred million dollars on each of its first three trading days. It’s interesting to note that the big winner so far hasn’t been Grayscale’s lowest-fee ETF, but rather BlackRock’s ETHA with $266.5 million in day one inflows, in spite of its significantly higher fee of 0.25%. What’s more, ETHA also broke records in terms of volume, outranking all other new launches of the past year by far (excluding the BTC ETFs, of course).

All in all, it’s safe to say that the people that thought institutions wouldn’t show any interest in ETH have already been proven wrong. Total day one trading volume for Ether ETFs was about a quarter of the BTC ETFs, while the flows were 16%, but if we exclude ETHE and GBTC that number goes up to 79%. Not too bad.

Bitcoin

Bitcoin Weekly

Bitcoin Daily

Bitcoin’s latest price movement is keeping traders on their toes.

Bulls have been euphoric for two weeks as they have seen BTC rise over 25% and knock on the doors of a key weekly level at $69k. This week was less fun for bulls and more fun for those that shorted the previous all-time high level as we have seen a drop back down to the daily level at $64.5k. On the daily timeframe, we can see that BTC was scooped up pretty quickly below the mentioned daily level, and at the time of writing, we are back on track towards the previous ATH.

What we don’t want to see at this point is that the current weekly candle remains in this formation (bearish hammer) as the outcome won’t be so pleasant for bulls but could give a good short signal.

SPX, Gold, and DXY

SPX

Gold

DXY

Terrible two weeks for stocks.

The S&P 500 has broken its “staircase” pattern, and we are looking at two huge red weekly candles. The question is, will it repeat the price action from April and continue after the breakout level is tested or are we going lower? It’s hard to bet on either at this point due to the upcoming elections and the Fed being unpredictable.

Gold gives us yet another fakeout.

While bulls were excited for a breakout last week, they now find themselves back inside the range that has formed since the beginning of April. There is more ahead for sure, but I am confident that the next breakout will stick if we get it. Don’t miss your opportunity to buy if it revisits the range low.

DXY fights to stay above 103.5.

As discussed last week, 103.5 is the last chance before doom. This one is also hard to predict given the upcoming elections, which will impact the price action.

Ethereum

Ethereum/USDT Weekly

ETH/BTC

Was the Ether spot ETF launch a "sell the news" event?

Well, it's definitely good news for the future; however, at the moment (and unsurprisingly if you remember how the Bitcoin ETF launch played out), the impact on the price was not positive as ETH tries to stay above $3,300. Bulls will want to see a bounce here and continuation towards the $4,000 level. Losing this level will bring us back to $2,819 for the third time, and who knows what happens there.

ETH/BTC is breaking down; the green zone couldn’t hold anymore, and we are once again close to 0.046 BTC.

Concluding notes

With all the attention on ETH, it’s worth mentioning that the Bitcoin ETFs have been buying the dip once again: even though price action hasn’t been ideal this week, the net flows have been $483.5 million so far. As for the Ether ETF launches, anyone who’s been around in January will remember that a spot ETF doesn’t mean that the asset will go up in a straight line. BTC had a 20%+ dip after the ETFs launched, before proceeding to almost double in price after the shakeout. I won’t be surprised if we see something similar play out now.

In any case, the Ether ETFs are an incredible tailwind for alts, regardless of any short-term volatility. The prospect of other ETFs is now on the table (Solana being the obvious first candidate), and the legitimacy and capital that will be brought into the altcoin market will lead to some incredible opportunities across the board. I don’t think we’ll have an altseason where everything pumps simultaneously, but if you pick your bags right, there will be plenty of money to be made.