Key Points
- Spot Ether ETFs have seen outflows of $433M, impacting Ethereum’s growth.
- Ethereum’s network usage decline and increasing supply have contributed to its inflationary status.
Outflows from Ether ETFs have reached a total of $433M after three consecutive days of outflows.
This, along with an increasing supply, has hindered the efforts of Ethereum (ETH) to gain.
Ethereum’s Struggle Despite Market Rebound
The cryptocurrency market experienced a significant rebound during the Asian trading session on Tuesday.
Despite this, Ethereum, the largest altcoin, has lost 23% of its value since the launch of spot Ether exchange-traded funds (ETFs) in the US last month.
Ethereum ETF Outflows and Increased ETH Supply
The Grayscale Ethereum Trust ETF (ETHE), which launched with $10 billion in assets, has consistently shown a negative flow since its inception.
The ETF still holds $4.84 billion in net assets, indicating a potential for further downside risk.
Last week, Vance Spencer, co-founder of Framework Ventures, predicted that investors might eventually allocate their portfolios with a 50-50 split between Bitcoin and Ether ETFs.
However, over the last three trading days, Bitcoin ETFs have seen consecutive inflows, while Ethereum ETFs have experienced consecutive outflows.
Ethereum’s network has also witnessed a decline in usage.
The number of unique active wallets on the Ethereum network has dropped by 20% in the last 30 days.
This decline in network usage has also affected the number of ETH tokens burned, leading to an increased supply and making Ethereum inflationary.
Data from Ultrasound Money showed that in the last seven days, around 18,000 ETH tokens were issued, while only 1,500 were burned.
This indicates that the supply of ETH has increased by over 16,000 tokens within seven days.
The increasing supply, coupled with reducing demand, has put downward pressure on ETH.
ETH was facing weak demand at press time, which could potentially weigh down on prices.
The Chaikin Money Flow, which measures accumulation and distribution, was negative at this time.
So, selling pressure has outweighed buying pressure since early August.
The positive Directional Movement Index (DMI) also showed a downtrend, as the positive Directional Indicator has been below the negative Directional Indicator since July.
However, the distance between the two lines has been narrowing, hinting at a potential reversal.
Traders should also watch out for a potential liquidity sweep at $2,115 as the price makes a strong rebound.
According to CryptoQuant, ETH needs a return of leverage traders for an upward correction.
Also, according to Coinglass, Ethereum’s Open Interest has dropped from a peak of $17 billion in May to the current $10 billion.
