Ethereum Faces $433M ETF Outflows as Network Activity Declines and Supply Increases

• The cryptocurrency market has experienced notable volatility, particularly affecting Ethereum (ETH) as it grapples with significant outflows from spot Ether ETFs.
• The cumulative net outflows from these ETFs have reached a substantial $433 million after three consecutive days of negative flows.
• Despite a brief rebound in the market, Ethereum’s value is still under pressure from declining demand and rising supply.

Discover the factors affecting Ethereum’s price amid noteworthy ETF outflows and declining network activity.

Ethereum ETF Outflows Reach $433 Million

The combined outflows from spot Ethereum ETFs now total $433 million, underscoring a sustained decline in interest. The Grayscale Ethereum Trust ETF (ETHE), which launched with an impressive $10 billion in assets, has seen continuous negative flows since its inception. Currently, it holds $4.84 billion in net assets, posing further downside risks for the cryptocurrency.

Changes in Investor Behavior

Framework Ventures co-founder, Vance Spencer, has hypothesized that investor portfolios might eventually balance between Bitcoin and Ether ETFs. However, recent activity contrasts with his prediction. While Bitcoin ETFs have enjoyed consistent inflows over the past three trading days, Ethereum ETFs have faced consecutive outflows.

Declining Network Activity Affects ETH Supply

In addition to ETF outflows, a reduction in Ethereum’s network activity has exacerbated the situation. According to DappRadar, the number of unique active wallets (UAW) on the Ethereum network has dropped by 20% over the past month. Currently, Ethereum ranks sixth in 30-day user count, hosting 1.66 million users.

Inflationary Pressure on ETH

This decline in network usage has also led to a dip in the amount of ETH tokens burned, resulting in an increase in the token’s supply. Data from Ultrasound Money reveals that in the past week alone, approximately 18,000 ETH tokens were issued while only 1,500 tokens were burned. Thus, ETH’s supply increased by over 16,000 tokens within a span of seven days, contributing to its inflationary trend.

Weak Demand Indicated by Market Metrics

Market indicators signal weak demand for ETH, which could further impact its price. The Chaikin Money Flow (CMF), a measure of accumulation and distribution, is currently negative, indicating that selling pressure outweighs buying pressure. The Directional Movement Index (DMI) also shows a downtrend, with the positive Directional Indicator staying below the negative Directional Indicator since July. However, the narrowing gap between the two lines suggests a potential reversal.

Potential for Market Correction

For ETH prices to recover, a return of leverage traders might be necessary. CryptoQuant’s analysis suggests that increased participation from leverage traders could drive the needed upward correction. Furthermore, data from Coinglass indicates that Ethereum’s Open Interest has decreased from a peak of $17 billion in May to the current $10 billion, highlighting reduced speculative interest.

Conclusion

In summary, Ethereum is facing significant challenges due to substantial ETF outflows, declining network activity, and weak market demand. These factors have collectively increased the token’s supply and exerted downward pressure on its price. Investors and traders should be vigilant of these dynamics and potential signals of market reversal for making informed decisions.