Traders are increasing their bearish positions on the cryptocurrency Ether (ETH) following the announcement that Grayscale Investments has withdrawn its application for an Ethereum futures exchange-traded fund (ETF). This development comes at a critical time for Ether, as it hovers near a key support level of $2,950. Recent data shows that Ether has experienced a 4% decline in the past 24 hours.
Grayscale’s decision to retract its application was made public on May 7, just as the United States Securities and Exchange Commission (SEC) was nearing a decision on the request within three weeks. This news prompted traders to establish approximately $345 million in short positions, which would be liquidated if the price of Ether increased by 3%. Conversely, a 3% decrease in price could wipe out around $237 million in long positions.
The outlook for Ether ETFs remains uncertain, as the SEC continues to evaluate other applications until the end of May. There is also speculation regarding the potential classification of Ether as a security, further adding to the uncertainty. As the May 23 deadline approaches, analysts are growing increasingly skeptical about the SEC’s approval of a spot Ether ETF.
Polymarket, a forecasting platform, echoes this sentiment, with 92% of participants predicting a decline in orders for spot Ether ETFs. Additionally, there are concerns about the usage of Ethereum. On-chain crypto analyst James Check highlights that “Ethereum usage is currently so low that its burn mechanism is not keeping up with issuance to validators,” as stated in a May 7 post on X.
The following day, Glassnode commented on Ether’s underperformance compared to Bitcoin, attributing it to a “measurable lag in speculative interest” from short-term holders. Despite the prevailing pessimistic outlook, some traders maintain an optimistic view for the future price of Ether. Pseudonymous trader Ash Crypto speculated to his followers on May X that there could be a breakout in the sixth quarter of 2024, based on a similar fractal pattern seen in Q2 2020.
Disclaimer: The views and opinions expressed in this article, by the author or any mentioned individuals, are for informational purposes only and should not be considered as financial, investment, or other advice. Investing or trading cryptocurrencies carries the risk of financial loss.
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