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Ethereum: Can the New Inverse ETF Lure in More ETH Bears?

  • Pro Shares announced a bearish Ethereum ETF.
  • The price of ETH remains relatively stable; however, the chances of liquidation grew.

Regarding the approval of ETFs, the cryptocurrency community is optimistic on the whole. ProShares has recently unveiled a unique ETF that specializes in Ethereum [ETH] and enables investors to place bets against its price.

Consideration for the Bears

The objective of the ProShares Short Ether Strategy ETF is to generate inversely correlated returns with the CME Ether Futures Index of Standard & Poor’s.

Simply put, if the index declines by 1%, this ETF will attempt to increase its value by 1%. This product, as opposed to direct investments in cryptocurrencies, is attached to Ethereum futures contracts.

In contrast, U.S. Securities and Exchange Commission approval is still pending for spot Bitcoin exchange-traded funds. Early in October, the initial reception of Ethereum ETFs was not as favorable as that of Bitcoin ETFs.

The largest of the three Ethereum-focused ETFs introduced by ProShares has assets of less than $10 million.

Michael Sapir, chief executive officer of ProShares, described how this novel inverse ETF enabled investors to adopt an adverse position on Ethereum without incurring the costs and difficulties associated with direct short positions.

One potential benefit is the increased influx of investors into the market, which could ultimately augment the liquidity of ether. In addition, it offers investors a means to mitigate risk, which increases their propensity to invest in ether.

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On the contrary, the introduction of said exchange-traded fund (ETF) could potentially result in increased price volatility, given that pessimistic funds have the ability to precipitate sharp depreciations in the value of ETH.

It may also have an effect on the market sentiment as a whole. It may cause some investors to become more pessimistic regarding the destiny of Ethereum.

Additionally, it is not inconceivable that certain investors could engage in an excessive shorting of ether. This may result in substantial price fluctuations.

What Actions Will Traders Take?

The ETH Liquidation Heatmap indicated a risk zone for Ethereum between $1700 and $1800 at the time of publication. At $1793, the price of ETH was in close proximity to this hazardous range. Therefore, it is prudent to exercise caution when trading ETH within this price range.

Numerous merchants might be forced to liquidate their holdings if prices decline, resulting in a possible surge of selling.

Traders should exercise caution by closely monitoring prices and implementing stop-loss orders or other protective measures. ETH is dependent on this range, and price fluctuations can be quite volatile.

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