What's Happening with Bitcoin & ETH?

Crypto prices are down on the week, with the total crypto market cap plunging 10% off its Monday high to break below the $2.5T level that served as support throughout the week prior. What events have moved markets this week?

Yesterday morning, panic gripped Crypto Twitter when a wallet controlled by the US government holding over $2B in BTC from the Silk Road forfeitures sent a test transaction to a Coinbase deposit address, followed up shortly thereafter by a $139M BTC transfer to the same address. 

While the move sparked concern that the US may begin offloading BTC holdings en masse, this sale had been announced back in January. Further, considering the nature of how over the counter (OTC) transactions are often structured, it is likely that these coins were already sold and that the BTC transfer merely represented post-trade settlement.

With BTC price on the decline, spot ETF buyers are beginning to display signs of apathy despite inflows into these products being net positive yesterday.

Many market participants were shocked to learn that the outflows from Ark’s ARKB ETF, which amounted to $87.5M yesterday, exceeded those of Grayscale, the first such occurrence since spot ETFs began trading in January!

Bloomberg analysts James Seyffart took the opportunity to remind crypto market participants that flows go both ways and Eric Balchunas recommended bracing for future outflows, which would likely come in tandem with declines in price.

The odds of spot ETH ETF approval have tumbled in recent weeks, with the lack of communication between the Securities and Exchange Commission (SEC) and proposed issuers becoming a major point of concern indicating the inevitability of future denial.

Despite optimistic hopes that this trend may be reversing after this morning’s announcement that the SEC was soliciting public comment on proposed Grayscale, Bitwise, and Fidelity spot ETH ETF applications, this development is standard procedure for the ETF application process and does not increase the odds of approval.

As the odds of ETH ETF approval as expressed by analysts and prediction markets have waned in recent weeks, growing pessimism towards ETH among traders is becoming evident.

The ETH/BTC ratio has tumbled 15% off its March 8 high, finding itself yesterday trading below key support level at 0.05 for a sustained period of time for the first time since January.

While the Ratio has rallied into today, its March 8 peak coincides with a local top in the discount to net asset value (NAV) on the Grayscale Ethereum Trust (ETHE), suggesting that relation between ETH and BTC correlates to some degree with the outcome of ETH ETF approval and that denial would have an unfavorable impact on price.

For those who believe ETH ETFs will be approved come the May final approval deadlines, aping ETHE could provide lucrative returns as the discount closes and ETH price accelerates upon approval, however, it's important to note how this behavior contrasts with that of GBTC, whose discount consistently narrowed leading up to approval.