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Ethereum’s spot ETFs took a major step towards trading yesterday after listing exchanges received “delegated approval” for their 19b-4 applications. Why is the ETH price now sliding?

ETF experts had initially projected that we could expect to receive a spot ETH ETF decision around 4 PM EST, but when the moment this deadline arrived devoid of any updates, the price of Ether collapsed by 8%.

Price managed to steadily climb higher from these lows in the hour that followed before popping nearly 4% higher after the first announcement of spot ETH ETF approval hit the news wires at 5:02 PM EST!

Many Ether bulls were disappointed with the gains exhibited post-approval, believing that market participants were so underweight their chosen asset approval would result in a ferocious pump, but the probability that many would be fading ETH in either the approval or denial scenarios had been high coming into the event.

In the denial scenario – which appears to have been fortuitously avoided – the SEC would likely have been forced to unveil a justification for why Ether is a crypto asset security and could not be wrapped in a commodity spot ETF, putting practically every token save BTC under the jurisdiction of the SEC wreaking havoc on broader alt markets.

Alternatively, playing out the approval scenario leads to the conversion of the Grayscale Ethereum Trust (ETHE) into a spot ETF, which will enable redemptions for over $10B in assets that have been held hostage at a discount for nearly three years and inevitably leading to Ether sell pressure.

Both BTC and ETH only experienced a couple percentage points of upside from SEC approval, and although it is unclear when spot ETH ETFs will begin trading or the ETHE redemptions will be enabled, market participants appear to be positioning for sell pressure from the unlocks.

While the ETH/BTC ratio went on a monstrous run this week, spiking to 0.057 on spot ETF approval, it has fallen 3% on the day as market participants gravitate back towards BTC, indicating that peak Ether strength has likely been achieved until ETHE redemptions are digested.

ETFs can be a bullish catalyst for crypto assets, but only if they attract net new buyers. Unfortunately for Ethereum, demand is far from guaranteed, while an overwhelming supply glut looms large.

Some analysts have extrapolated the 60% gains made by BTC since the approval of its spot ETFs to suggest that Ether could similarly rise to $6k and beyond, however, it’s important to note that if this historical trend is to hold, ETH will be subject to a 20% drawdown in the coming weeks, retracing the entirety of this most recent move up as sell pressure from ETHE redemptions weigh on price.