10x Research: In the post-ETF era, where will the price of ETH go?

Author: 10x Research

Compiled by: Azuma, Odaily Planet Daily

Editor’s note: In the early morning of July 23, Beijing time, the U.S. Securities and Exchange Commission (SEC) officially approved the Ethereum spot ETF, allowing multiple The ETF officially launched trading on Tuesday. However, perhaps because the expectation of ETF approval has already been digested by the market, the price of ETH did not fluctuate significantly after the SEC’s announcement. As of the publication of the article, it was temporarily reported at 3442.62 USDT, a 24-hour decrease of 1.3%.

At the moment, one of the things that the market is most concerned about is undoubtedly the subsequent trend of the price of ETH. Especially after the ETF officially opens for trading tomorrow, can the capital inflow brought by the ETF boost the price of ETH? Will there be a potential trend of "when all the good things come out, the bad things will turn out to be bad"? In response to these problems, 10x Research, an investment institution obsessed with market predictions, once again released a market analysis on the future trend of ETH.

The following is the original content of 10x Research.

Let us first review the approval process of the Ethereum spot ETF.

On May 20, the SEC unexpectedly required exchanges to update their 19b-4 filing materials, which meant that the filing progress of the Ethereum spot ETF had made substantial progress, and the market also adjusted the probability of approval of the ETF based on this change. It was directly increased from 25% to 75%.

On May 23, the SEC officially approved the 19b-4 filing for the Ethereum Spot ETF, solving the biggest problem before the ETF’s listing.

In the seven days since then, Ethereum’s futures open interest has increased directly from $8.8 billion to $13 billion, and the price of ETH has also jumped from $3,065 to a short-term high of $3,959.

This morning, the SEC has officially completed the final approval of the Ethereum spot ETF, allowing the trading product to start trading tomorrow. We have witnessed similar milestones many times in the past, such as the launch of Bitcoin futures in December 2017, the listing of Coinbase in April 2021, the listing of Bitcoin futures ETF in October 2021, and Bitcoin spot in January 2024 ETF listings, All these milestones have been followed by short-term corrections.

Currently, Trading users are constantly asking us whether ETH will experience a similar trend...

Although the price of ETH once rose to $3,959 at the end of May, the price of ETH also fell to $3,959 in early July. Under $3000. This in itself shows that traders are not confident that ETH prices will continue to rise. Although ETH had already climbed back to $3,500 before this ETF was approved, we suspect many people will choose to sell and take profits as soon as the ETF is launched - maybe even before it is launched.

In addition,

the marketing efforts surrounding the Ethereum spot ETF are also relatively low, which may directly lead to low retail or institutional interest in the ETF. BlackRock CEO Larry Fink recently gave a televised speech, but he only promoted Bitcoin and not Ethereum. This suggests that (at least initially) BlackRock’s clients have relatively limited interest in ETH.

When the Bitcoin spot ETF was released,

the annualized funding rate in the futures market was close to 15%, and once increased to 70% in February, which attracted the attention of many arbitrage funds——They would buy the ETF and Hedging with futures to earn arbitrage profits. This buying move reinforces the bullish sentiment surrounding BTC.

Currently, the annualized funding rate in the Ethereum futures market is only 7-9%, which is not very attractive to arbitrage institutions, especially considering the capital static cost of at least 5% (federal funds rate) . Compared to the situation with the Bitcoin spot ETF in February, the Ethereum spot ETF is expected to be unlikely to attract as much arbitrage capital inflows, thus weakening the optimism about ETH.

Note: Ethereum Stochastics indicator (greater than 90% means overbought).

From a technical point of view, ETH’s Stochastics indicator has basically peaked, This means that it is a good shorting opportunity now - we will use the recent high of 3560 as a stop loss level.

Relatively speaking, We prefer to go long BTC while hedging short ETH, rather than going short directly. Traders can also sell Ethereum put options and buy Bitcoin call options at the operational level. Options are relatively expensive, though, with implied volatility at the September 27 expiration at 65%, but 30-day realized volatility at just 50%, suggesting that implied volatility includes a significant premium.

Judging from the popularity of market discussions, the discussion about Solana during this cycle is also significantly higher than that of Ethereum. The Solana ecosystem gave birth to the craze of meme tokens, but Ethereum missed this opportunity due to high gas fees. We can cite various data to prove that Solana is more popular than Ethereum. For example, Solana currently has 14.2 million active addresses, while Ethereum only has 7.5 million...

Ethereum's market dominance reached a month ago The high of 18.4% has now dropped to 17.0%. The lack of market interest is also reflected in gas prices that have never rebounded. The Dencun upgrade in March 2024 significantly reduced network fees, but the number of network transactions has stagnated, the number of active addresses is similar to three years ago, and the Ethereum network has barely grown.

In the zero-interest trade finance environment, Ethereum’s staking income advantage was a key reason why the ecosystem gave birth to DeFi Summer in 2020 and 2021. Today, Ethereum’s staking yield is just 3.12%, and Coinbase’s Ethereum staking yield is just 2.91%. Although the ETF itself does not involve staking, from a revenue perspective, opportunity cost is a key reason for the sluggish demand for ETH this cycle.

The beta coefficient of ETH’s rise is also weakening compared to BTC. Since the beginning of this bull market, ETH's performance has been unsatisfactory. If we count from October 2022, ETH's performance will lag 40% behind BTC.

Taking into account the above factors and the fact that ETF issuers have not yet carried out large-scale marketing activities; in addition, some traders will choose to close some long positions when the news comes out; in addition, grayscale’s potential capital outflows must also be considered... …This could indeed be a case to be bearish on ETH, at least initially.

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