Original article by Biraajmaan Tamuly
Original translation: Mars Finance, MK
Despite the launch of the Ethereum ETF, the ETH price failed to break through the $3,400 resistance level. The main reason was the massive outflow of funds from Grayscale’s spot Ethereum ETF.
Ethereum fell to $3,278 and despite the launch of a spot Ethereum ETF in the U.S., markets are set to close July with a loss of around 1%.
Since the US spot Ethereum ETF was listed on July 23, the market immediately responded by causing its price to fall by 9%. Since its listing, the price of ETH has fallen by 4.05%. In addition, there are other factors that may have hindered its price performance.
ETHE's capital outflow rate exceeds GBTC
According to Sosovalue, the ETF has performed poorly overall, with cumulative net outflows now standing at $439.64 million.
As shown in the chart below, the vast majority of the selling pressure came primarily from Grayscale. As of July 29, other major spot ETH ETFs including BlackRock, Bitwise, and Fidelity all recorded positive daily inflows.
Source: Sosovalue
We also noticed that Grayscale’s ETHE saw faster outflows than GBTC following the sharp drop in the Bitcoin spot market. Bitcoin fell to $66,317, and the ETF has lost assets since its launch in January. The chart below highlights the asset losses of both investment vehicles since the conversion. GBTC vs. ETHE asset losses since the conversion
Image source: Glassnode
According to Cointelegraph, analysts expect Grayscale’s massive ETH outflows “may” decrease this week.
Exchanges have “almost no demand” for ETH
Additionally, Ethereum has seen a significant decrease in exchange withdrawal volume since March. Independent analyst Crypto Lion pointed out that this indicator is closely related to the price and indicates "almost no demand."
Source: Cryptoquant
Crypto Lion also believes that the estimated leverage ratio (ELR) has driven ETH’s price action during this turbulent period. This metric reflects the ratio of open interest in futures contracts to exchange balances. A higher ELR indicates that futures/perps are dominating price action, which is usually short-lived or volatile. He noted:
After the ETH ETF was approved, the ETH price fluctuated in a range. However, it is recommended not to buy it without withdrawals and the ELR issue is not resolved.
Coinbase Premium Index turns negative
Coinbase data also shows a similar lack of demand. In the second quarter of 2024, Coinbase's ETH premium index continued to decline. The index reached its high point for the year in March, which coincided with ETH's peak, but has now turned negative. Negative premium values indicate that U.S. investors lack buying power and spot demand has dried up.
Source: Cryptoquant
In May 2024, the potential approval of an Ethereum ETF increased spot buying on Coinbase, which had a bullish impact on its price. The Coinbase Premium Index also surged above 0.15, indicating demand from ETH spot buyers. As mentioned above, the current downward trend in the index has had an opposite effect on ETH prices.
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