On Monday, U.S.-listed spot Ether (ETH) exchange-traded funds (ETFs) saw significant net inflows of nearly $49 million, despite a dramatic 20% drop in Ether's price. This influx underscores continued investor interest in the second-largest cryptocurrency by market capitalization, even amid severe market turbulence.
The sharp decline in Ether’s price represents its most substantial one-day drop since 2021. The price plunge was largely attributed to Jump Crypto, a major trading firm, moving substantial amounts of Ether to centralized exchanges in preparation for potential sales. This move, coupled with a broader downturn in the crypto market, exacerbated the selling pressure. Additionally, over $340 million in ETH futures liquidations contributed to the negative sentiment.
Despite these challenges, professional investors capitalized on the dip. According to data from SoSoValue, ETH ETFs experienced trading volumes exceeding $715 million, marking the highest level of activity since July 30. Notably, BlackRock’s ETHA led the charge with $47 million in inflows. Fidelity’s FETH and VanEck’s ETHV each saw $16 million in inflows.
Conversely, Grayscale’s ETHE experienced outflows of $46 million. However, its smaller Ethereum Mini Trust (ETH) recorded inflows of $7 million. Overall, since their debut on July 23, ETH ETFs have seen net outflows totaling $460 million, reflecting a cautious long-term outlook. In contrast, Bitcoin ETFs garnered over $1 billion in net inflows during their first 12 days of trading, highlighting a disparity in investor sentiment.
ETF flows offer insights into market trends and investor preferences. Despite the recent turmoil, some market observers noted that applications built on the Ethereum network demonstrated resilience. Alice Liu, lead researcher at CoinMarketCap, pointed out that Ether’s price drop was primarily driven by the Jump Crypto sell-off and liquidations from large whale wallets. “On a positive note, LSDFi stood up to the stress test: there’s been no major increase in Lido’s withdrawal queue, and no liquid staking depends on different projects,” Liu explained. LSDFi, or liquid staking derivatives finance, refers to blockchain activities that allow users to earn rewards while maintaining liquidity through derivative tokens.
Moreover, Liu highlighted that the recent liquidation event appears to have rejuvenated the decentralized finance (DeFi) market, with activity levels on the Ethereum network showing notable improvement. Gas fees, which had spiked to 370 Gwei, have also decreased to a more manageable range of 10-15 Gwei, further signaling a stabilization in the network’s activity.
In summary, while Ether’s price has faced significant volatility, the strong inflows into ETH ETFs indicate a resilient investor base that remains optimistic about the asset’s long-term prospects. The continued activity in DeFi and the stabilization of gas fees suggest that fundamental aspects of the Ethereum network are holding up well amidst the broader market challenges.
August 2024, Cryptoniteuae