Tech stocks continue to be under pressure, with Ethereum plummeting. Why is ETHE eager to sell?

In the second quarter, the US GDP showed strong growth, but technology stocks continued to be under pressure. In the cryptocurrency market, Bitcoin returned above $65,000, showing a relatively stable trend. However, due to continuous outflows from Grayscale's Ethereum Trust (ETHE), ETH briefly fell below $3,100, with a 24-hour decline of up to 4.61%.

Strong U.S. GDP, Inflation Continues to Cool

Yesterday, the annualized growth rate of the U.S. Gross Domestic Product (GDP) for the second quarter was 2.8%, higher than economists' forecast of 2.0%.

The PCE price index increased by 2.6% this quarter, lower than the 3.4% in the first quarter. Excluding the more volatile food and energy components, the core Personal Consumption Expenditures (PCE) price index for the second quarter was 2.9%, a decline from the 3.7% spike in the first quarter. The core PCE index is the Federal Reserve's preferred inflation price index.

Grayscale ETHE Continues to See Outflows, ETH Dropped Below $3,100 at One Point

The Ethereum spot ETF saw a net outflow of $133 million on the second day of trading, with Grayscale's ETHE being the main culprit, seeing outflows of $810 million over two days. According to data from Farside Investors, ETHE saw another outflow of $346.2 million on the third day, July 25th, leading to a significant drop in the price of Ether (ETH) yesterday. ETH fell below $3,100 at one point last night, but rebounded slightly before the deadline, trading at $3,178, marking a 4.61% drop in the past 24 hours.

Why the Rush to Sell ETHE?

According to Bloomberg ETF analyst James Seyffart, comparing the performance of the Ethereum spot ETF and the Bitcoin spot ETF on their first days of trading, the main difference lies in the significant outflows of ETHE, as GBTC was still at a meaningful discount at launch. GBTC saw a gradual rebound from -6.53% on January 9th to -0.11% on January 22nd. However, ETHE had already surged close to 0 on May 24th, after the approval of the Form 19-4b for the Ethereum spot ETF.

Ethereum vs. Bitcoin Spot ETF, Bloomberg Analyst: A Very Stable First Day of Issuance!

In other words, investors who saw profitability in the discount of Grayscale ETHE lost their arbitrage opportunity as early as May 24th but had to wait two months before being able to sell. Thus, they were eager to sell upon the listing of the Ethereum spot ETF, leading to significant selling pressure on ETH in the early stages.

Matt Hougan, founder of ETF issuer Bitwise, also believes that the initial weeks of Ether's performance may be unstable as funds may flow out after the $11 billion Grayscale Ethereum Trust ETHE is converted to an ETF. However, by the end of the year, new highs are expected to be reached, with ETH potentially surpassing $5,000.

Bitwise: Ethereum Spot ETF Will Propel ETH Beyond $5,000