Ethereum, the second-largest cryptocurrency by market capitalization, has experienced a significant price drop. Over the last 24 hours, Ethereum has fallen by 8.5%, currently trading at $3,178. 

This decline follows the long-awaited launch of the Ethereum exchange-traded fund (ETF), which initially brought optimism to the market. However, this optimism quickly turned into a sell-off, leading to the subsequent price decline.

Market data from SoSoValue reveals that the Grayscale Ethereum ETF (ETHE) had a net outflow of over $810 million in its first two days of launch. This pattern is similar to that of the early weeks of the Grayscale Bitcoin Trust (GBTC), which also experienced heavy outflows during the initial weeks of its Bitcoin ETF trading earlier this year.

In contrast, other ETF issuers like Bitwise recorded $204 million in inflows on the first day, mainly from venture capital firm Pantera Capital. Despite this, Pantera’s quick sell-off of its "seed investment" signals a lack of confidence in sustained growth. 

A recent 10x report suggests that the initial excitement surrounding the Ethereum ETF launch has dissipated, leading to a "sell-the-news" scenario. This pattern has been observed in previous market events in December 2017, April 2021, October 2021, January 2024, and now July 2024. Historically, this trend indicates that after the launch hype, a market correction typically follows.

Contributing Factors to the Sell Pressure

Several factors have contributed to the recent sell pressure on Ethereum. The timing of the ETF launch coincided with the distribution of Bitcoin from the Mt. Gox exchange, adding extra selling pressure to the crypto market. 

Additionally, the US tech earnings season has started poorly, with significant sell-offs from major companies like Alphabet and Tesla. With 40% of market capitalization set to report earnings next week, a conservative outlook due to weakened consumer spending could further impact the market.

Ethereum appears particularly vulnerable under current market conditions. Its fundamentals, including new user growth and revenue, have stagnated. Before the ETF launch, 10x Research had already highlighted Ethereum as overbought, suggesting it was ripe for a short trade. 

Moreover, Wall Street traders struggle to define Ethereum's unique value proposition, whereas Bitcoin enjoys the status of "digital gold,” according to 10X Research.