Ether ETFs Face Liquidity Crisis as Market Depth Drops by 20%

• Ether ETFs face liquidity challenges, with U.S.-based exchanges seeing a 20% drop in market depth.
• The FBI warns that North Korean hackers are now targeting ETF issuers, exposing risks in centralized custodianship.

Ether (ETH) ETFs have had a significant impact on market liquidity since their debut in July 2024. According to CCData, the average 5% market depth for ETH pairs on U.S. centralized exchanges has decreased by 20%, to around $14 million.

Offshore exchanges have also seen a 19% fall in liquidity, leaving them with only $10 million. This decrease in liquidity has resulted in higher price sensitivity, which means that larger deals can now more readily alter the spot price of Ether, increasing market volatility.

Since the ETFs’ introduction, the average 5% market depth for ETH pairs on U.S.-based centralized exchanges has declined by 20% to roughly $14 million. On offshore centralized venues, it’s dropped by 19% to around $10 million. It’s actually now easier to move the spot price by 5%…

— Wu Blockchain (@WuBlockchain) September 6, 2024

Market Conditions and Investor Withdrawals Worsen Ether ETFs Liquidity Decline 

A number of factors, such as seasonal trends that are prevalent during the summer months and frequently coincide with decreased trading activity, could be to blame for this decline in liquidity.

Additionally, unfavorable market conditions have aggravated the predicament. Since the ETFs introduction, investors have withdrew more than $500 million from Ether ETFs, contributing to market turbulence.

On the other hand, as we previously reported, Brazilian regulators recently authorized BlackRock’s application to list an Ethereum ETF (ETHA) on domestic markets. This ETF is projected to debut at a price range of $7.26 to $9.0, with a 0.12% management fee.

The approval comes just months after Solana ETFs were launched in the region, demonstrating that cryptocurrency investment products are becoming more popular in emerging nations.

Beside that, Coinbase’s participation is also a big market influencer. The platform now leads the custodian industry for Bitcoin and Ethereum ETF issuers. This concentration has generated security worries, especially in light of the FBI’s recent warnings.

According to the CIA, North Korean hackers are increasingly focusing on ETF issuers, as opposed to their traditional targets of decentralized finance (DeFi) and centralized exchanges (CEX). This new attack vector highlights the hazards associated with custodial centralization in the ETF sector.

As of writing, ETH is trading around $2,360.03 after dropping 1.41% over the last 24 hours with a daily trading volume of $14.373 billion.

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