Ethereum faces challenges as ETH ETF withdrawals increase and supply grows

Ethereum, one of the leading cryptocurrencies, is facing challenges as it grapples with outflows from Ether exchange-traded funds (ETFs) and an increase in its supply. The recent trend of decreasing demand coupled with a rise in supply has put downward pressure on Ethereum’s price.

The crypto market witnessed a strong recovery during the Asian trading session, with Ethereum experiencing a 2% increase to reach $2,678. Despite this uptick, Ethereum has seen a 23% decline in value since the introduction of spot Ether ETFs in the US last month.

The outflows from spot Ethereum ETFs have amounted to $433 million over three consecutive days. The Grayscale Ethereum Trust ETF (ETHE), initially valued at $10 billion, has been experiencing continuous negative flows since its inception. This persistent outflow has reduced the ETF’s net assets to $4.84 billion, indicating further downside risks.

Framework Ventures co-founder, Vance Spencer, predicted a potential shift in investor portfolios towards a 50-50 split between Bitcoin and Ether ETFs. However, recent trading activity has shown inflows into Bitcoin ETFs while Ethereum ETFs have witnessed consecutive outflows.

Moreover, Ethereum’s network activity has declined, as evidenced by a 20% drop in the number of unique active wallets (UAW) over the last 30 days. This decrease in network usage has also impacted the amount of ETH tokens burned, leading to an increase in supply and making Ethereum inflationary.

Data from Ultrasound Money revealed that within a week, around 18,000 ETH tokens were issued, while only 1,500 were burned, resulting in a net increase of over 16,000 tokens. This surplus supply, combined with reduced demand, has contributed to the downward pressure on ETH.

Indicators such as the Chaikin Money Flow and the Directional Movement Index suggest weak demand for ETH, potentially influencing its price negatively. Traders are advised to monitor a potential liquidity sweep at $2,115 as the price rebounds.

In conclusion, Ethereum’s price faces challenges due to outflows from ETFs, declining network activity, and weak demand indicators. These factors are crucial to watch as they impact the cryptocurrency’s performance in the market.