Why ETH Demand Remains Low Despite Ethereum ETFs?
Despite the launch of Ethereum ETFs, ETH prices have failed to break through the $3,400 resistance level, mainly due to significant outflows from Grayscale’s spot Ethereum ETF.
The price of Ethereum fell to $3,278, even with the introduction of a spot Ethereum ETF in the U.S., closing July with approximately a 1% loss.
Since its listing on July 23, the U.S. spot Ethereum ETF saw a 9% price drop. From the listing date, ETH has declined by 4.05%. Other factors might also be hindering its price performance.
ETHE Outflows Surpass GBTC
According to Sosovalue, the overall ETF performance has been poor, with cumulative net outflows reaching $439.64 million.
As shown in the chart below, most selling pressure stems from Grayscale. As of July 29, other major spot ETH ETFs, including those from BlackRock, Bitwise, and Fidelity, have recorded daily inflows.
Additionally, following a sharp drop in the spot Bitcoin market, Grayscale’s ETHE has experienced outflows faster than GBTC. Bitcoin’s price fell to $66,317.
The chart below highlights asset losses for both investment tools since their conversion. Asset losses of GBTC and ETHE since conversion.
Analysts predict that Grayscale’s massive ETHE outflows “might” decrease within the week.
“Almost No Demand” for ETH on Exchanges
Furthermore, since March, Ethereum withdrawal volumes from exchanges have significantly decreased. Independent analyst Crypto Lion noted that this indicator, which is closely related to price, shows “almost no demand.”
Crypto Lion also suggested that the estimated leverage ratio (ELR) has influenced ETH’s price movements during this turbulent period. This indicator reflects the ratio of open futures contracts to exchange balances.
A higher ELR indicates that futures/perps are dominating price movements, which are usually short-term or volatile. He remarked:
“Post-ETF approval, ETH prices have shown range-bound movements. However, without withdrawals and unresolved ELR issues, buying is not recommended.”
Coinbase Premium Index Turns Negative
Data from Coinbase also reflects a similar lack of demand. In the second quarter of 2024, Coinbase’s ETH premium index continued to decline.
This index peaked in March, coinciding with ETH’s peak, but has since turned negative. A negative premium indicates a lack of purchasing interest from U.S. investors, leading to a depletion of spot demand.
In May 2024, with the potential approval of Ethereum ETFs, Coinbase saw an increase in spot purchases, which had a bullish impact on prices.
The Coinbase premium index soared above 0.15, indicating demand from spot ETH buyers. As discussed earlier, the current downtrend of this index has had the opposite effect on ETH prices.