Why is ETH demand still insufficient even after the launch of Ethereum ETFs?
TechFlow Selected TechFlow Selected
Why is ETH demand still insufficient even after the launch of Ethereum ETFs?
The main reason is significant outflows from Grayscale's spot Ethereum ETF, leading to a decline in ETH price.
Navigating Web3 tides with focused insightsAuthor: Biraajmaan Tamuly
Translation: Mars Finance, MK
Despite the launch of Ethereum ETFs, ETH price failed to break above the $3,400 resistance level. The main reason is significant outflows from Grayscale's spot Ethereum ETF.
Ethereum's price dropped to $3,278, and despite the U.S. launch of spot Ethereum ETFs, the July market is set to close with approximately a 1% loss.
Since their listing on July 23, the U.S. spot Ethereum ETFs have seen an immediate market reaction causing a 9% price drop. From launch to date, ETH price has cumulatively declined by 4.05%. Additionally, other factors may have hindered its price performance.
ETHE Outflows Faster Than GBTC
According to Sosovalue data, the overall ETF performance has been poor, with cumulative net outflows reaching as high as $439.64 million.
As shown in the chart below, the majority of selling pressure has come primarily from Grayscale. As of July 29, other major spot ETH ETFs—including those from BlackRock, Bitwise, and Fidelity—have recorded daily positive inflows.
Source: Sosovalue
We also observe that following a sharp decline in the spot Bitcoin market, Grayscale’s ETHE has experienced faster outflows than GBTC. With Bitcoin dropping to $66,317, the ETF has underperformed since its January launch. The chart below highlights the asset losses of both investment vehicles since their conversion.
Chart source: Glassnode
According to Cointelegraph, analysts expect the massive outflows from Grayscale’s ETHE to possibly slow down within this week.
"Almost No Demand" for ETH on Exchanges
Moreover, Ethereum's exchange withdrawal volume has significantly decreased since March. Independent analyst Crypto Lion noted that this metric closely correlates with price, indicating "almost no demand."
Source: Cryptoquant
Crypto Lion also believes that the Estimated Leverage Ratio (ELR) has driven ETH’s price movements during this volatile period. This indicator reflects the ratio of open futures contracts to exchange balances. A higher ELR suggests that futures/perps are dominating price action, which is often short-lived or volatile. He stated:
After the approval of ETH ETFs, ETH price entered a range-bound movement. However, without withdrawals and unresolved ELR issues, buying is not recommended.
Coinbase Premium Index Turns Negative
Data from Coinbase also shows a similar lack of demand. In Q2 2024, Coinbase's ETH premium index continued to decline. The index peaked in March alongside ETH’s yearly high but has now turned negative. A negative premium indicates weak purchasing momentum among U.S. investors and dried-up spot demand.
Source: Cryptoquant
In May 2024, anticipation surrounding potential Ethereum ETF approval increased spot buying volume on Coinbase, creating bullish price pressure. The Coinbase premium index surged above 0.15, signaling strong demand from ETH spot buyers. However, as noted above, the current downward trend in the index is having the opposite effect on ETH price.
Join TechFlow official community to stay tuned
Telegram:https://t.me/TechFlowDaily
X (Twitter):https://x.com/TechFlowPost
X (Twitter) EN:https://x.com/BlockFlow_News
@Cointelegraph
