Ethereum Crypto Price Decline Triggers $420 Million ETF Sell-Off

The value of Ethereum, a popular cryptocurrency, recently plummeted by 26%, largely influenced by investor sentiment amid significant outflows from ETFs. The prevailing macroeconomic conditions have further exacerbated the situation.

The decline in Ethereum’s price seems to be more linked to dwindling investor confidence rather than the outflows observed from ETFs. Since the introduction of U.S. spot ETFs for Ethereum on July 23, the price of Ether (ETH) has tumbled by over 26%, with a net outflow amounting to $420.5 million. Analyst Aurelie Barthere from Nansen emphasized that the decrease in risk appetite among investors, rather than ETF outflows, plays a pivotal role in shaping Ether’s price movement. This shift in sentiment is not unique to Ethereum, as even Bitcoin experienced a 14% decline during the same period, signaling a broader investor ‘fatigue’ not directly tied to ETF launches.

Initially, investors had high hopes that the introduction of ETFs for Ethereum would propel a substantial price surge, akin to Bitcoin’s experience where ETFs constituted a significant portion of new investments. However, Ether’s price nosedived from $3,500 to $2,587 by August 19, falling short of initial expectations.

The recent market sell-off of cryptocurrencies, impacting both Ether and Bitcoin, has been predominantly influenced by U.S. stock market dynamics. This correction has erased a substantial portion of the gains made in 2024, driving prices to their lowest in the past five months. Factors contributing to this bearish phase include the Bank of Japan’s interest rate hikes and substantial Ether sales by major market players.

The ongoing price decline in Ether might also be attributed to the surge in the cryptocurrency’s supply. Since the inception of spot ETFs for Ethereum in the U.S. on July 23, the Ether supply has surged by 60,555 ETH, equivalent to over $155 million. This surge has propelled the Ether supply growth rate 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.

Additionally, the recent Dencun update for Ethereum, aimed at enhancing scalability and reducing layer-2 network fees, may have impacted Ether’s price decline. Despite the approval of Ethereum ETFs, Ether’s price continued to suffer post-update, plummeting by 35% while the supply surged by over 197,000 ETH.

Despite the prevailing challenges, some experts foresee a potential breakout in Ether’s price in the first quarter of 2025. Based on historical chart patterns, cryptocurrency trader Ted anticipates the consolidation phase to conclude by November or December 2024, potentially paving the way for a phase of parabolic growth in early 2025.