The price of the crypto Ethereum has recently experienced a 26% decline, mainly due to investor sentiment, despite the massive outflows from ETF. The macroeconomic conditions worsen the situation.

Let’s see all the details below. 

The Ethereum ETFs sell $420 million, but the price change of the crypto is limited  

As anticipated, the recent weakness in the price of Ether seems to be more related to the reduced confidence of investors than to the outflows recorded by the ETFs on Ether.

Since the debut of the U.S. spot ETFs on Ether on July 23, the price of Ether (ETH) has dropped by over 26%, with a net outflow of 420.5 million dollars. 

However, according to Aurelie Barthere, principal analyst at Nansen, it is not the outflows from ETFs that most influence the price of Ether, but rather the decrease in risk appetite among investors. 

Barthere highlighted that even Bitcoin (BTC) experienced a 14% decline in the same period. Thus attributing this trend to a general ‘fatigue’ of investors, not related to the launch of ETFs.

At the beginning, investors hoped that the launch of ETFs on Ether would lead to a significant price increase, as happened with Bitcoin, where ETFs represented a substantial portion of new investments. 

However, the price of Ether dropped from $3,500 to $2,587 by August 19, disappointing initial expectations.

The influence of the FED

The recent sell-off of criptovalute, which has affected both Ether and Bitcoin, has been primarily influenced by the dynamics of the U.S. stock market.

As explained by Barthere, the cryptocurrency market has been hit by a correction that has wiped out much of the gains of 2024, bringing prices to their lowest in the last five months. 

This bearish phase has been fueled by various factors. Among these, the increase in interest rates by the Bank of Japan and the sales of Ether by major market makers.

It remains to be seen whether the current price drop is just a temporary correction or marks the end of the bull market for cryptocurrencies. Much will depend on the next moves by the Federal Reserve. 

If the FED manages to cut rates while maintaining economic growth, the cryptocurrency rally could resume. Other experts, however, believe that the bull market could continue until 2025, with Bitcoin leading the way.

Increase in supply and Dencun update

In any case, the recent decline in the price of Ether may have also been influenced by the increase in the supply of the cryptocurrency.

Since the debut of spot ETFs on Ether on July 23 in the United States, the supply of Ether has grown by 60,555 ETH. That is equivalent to a value of over 155 million dollars, according to data from Ultrasound.money.

This increase has led to the growth rate of Ether supply to 0.61% annually over the last 30 days. With an annual issuance of 940,000 Ether and a burn rate of 203,000 ETH.

In relation to this, the recent Dencun update of Ethereum, released on March 13, aimed to improve scalability and reduce fees of layer-2 networks.

However, according to a report from August 19 by CryptoQuant, despite the approval of ETFs on Ethereum, the price of Ether has continued to suffer after the upgrade. Specifically, recording a drop of 35% while the supply increased by over 197,000 ETH.

Despite the current difficulties, some experts foresee a possible breakout of the price of Ether in the first quarter of 2025. 

According to the cryptocurrency trader Ted, based on historical chart patterns, the consolidation could conclude in November or December 2024. Thus precluding a phase of parabolic growth at the beginning of 2025.