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Grayscale Outflows and political conditions weigh on ETH
This week, we dive into the launch of the ETH ETFs and the lackluster price performance. We discuss political factors affecting markets, Ethereum institutional activity and Ether’s underperformance.
Network Fees — Sum of total fees spent to use a particular blockchain. This tracks the willingness to spend and demand to use Bitcoin or Ether
- Bitcoin’s weekly fees set a new yearly low, and are now down 97% since it’s highs from the week of the BTC halving, when Runes was introduced
- ETH fees have slightly increased, but are still down 87% from yearly highs
Exchanges Netflows — The net amount of inflows minus outflows of a specific crypto-asset going in/out of centralized exchanges
- BTC recorded a yearly high in exchange inflows, as Mt Gox continues distributing funds
- ETH recorded net outflows of $440M as spot ETFs launched
ETH Falls Post-ETFs Launch
Stocks and crypto have had a rocky end of July, erasing monthly gains. ETH in particular has lagged behind, likely due to a mix of a change in macro sentiment and profit-taking from people who were waiting for the ETFs to launch.
Source: ITB Capital Markets Insights
Worsening Macro Conditions — major stock indices are down nearly 10% from their recent highs, likely weighing down on crypto as well
- Markets had been rallying at the beginning of the month partly due to Trump’s odds of winning the presidency climbing following the debate and then his shooting. Trump is perceived to be more supportive of capital markets than the democratic party, thus the rally
- Following Biden’s decision to drop out and endorse Kamala Harris, Trump’s odds have dropped from 70% to 62% per Polymarket, causing some of the gains to be retraced in stocks and crypto alike
Despite the long-awaited ETH ETFs launching, the changing political and economic landscape appears to be weighing down on Ether’s price.
Source: ITB ETH Financial Indicators
Institutional Activity on ETH Picks Up — Large transaction volume reached a monthly high following the ETFs release
- Volume from ETH transactions over $100k has spiked after the ETFs launched
- The yearly high was recorded the day the ETFs were approved
- Despite large volumes being processed on-chain, there actually have been outflows thus far from the ETFs
Grayscale Outflows Offset Inflows — ETH ETFs have recorded net outflows since launch as people take profits and unwind Grayscale positions
- Three days after the ETH ETFs launched, they have experienced a total outflow of approximately $190M per Farside
- This is largely due to Grayscale’s ETHE recording $1.1B in outflows, likely from people who bought it at a discount and sold at a profit following its transition to an ETF
Source: ITB ETH/BTC Market Cap Comparison
ETH/BTC Struggles in 2-Year Downtrend
- ETH’s market cap went from being over 50% of Bitcoin’s in September 2022 to just 32% at the moment
- Many hoped the launch of ETH ETFs to be a landmark moment bringing wall street adoption of Ethereum, but so far the outflows do not reflect that trend
Is it too early to label the ETH ETFs as a disappointment?
- Even though the ETH ETF outflows appear negative, it’s worth recalling that Bitcoin also recorded net outflows shortly after launch due to Grayscale — a trend that quickly reverted into large inflows a couple of weeks later
- Therefore, it might be best to wait at least until mid-August to determine the success of the ETH spot ETFs
Overall, macro conditions worsening and ETF flows disappointing have led to ETH’s underperformance. Is there hope for these trends to revert? Or will ETH continue lagging behind Bitcoin?
ETH Falls Post ETFs Launch was originally published in IntoTheBlock on Medium, where people are continuing the conversation by highlighting and responding to this story.
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