Ethereum's Liquidity Crisis: 20% Drop Following ETF Launch

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by Giorgi Kostiuk

2 years ago

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  1. Liquidity Drop After ETF Launch
  2. Daily Outflow Data
  3. Impact of ETFs and Ethereum Controversies


    4. Since the launch of nine Ethereum ETFs on July 23, Ethereum's liquidity has fallen by 20%. Despite Bitcoin's success with ETFs, the Ethereum market did not experience the same growth.

    Liquidity Drop After ETF Launch

    According to CCData, the 5% market depth for ETH pairs on American centralized exchanges has decreased to $14 million. Offshore, the situation is similar with liquidity down 19% to about $10 million. This increase in price sensitivity makes the spot price of ETH more volatile for large trades. CCData analysts note that although market liquidity for ETH pairs on centralized exchanges is still higher than at the start of the year, it has dipped by almost 45% since June’s peak.

    Daily Outflow Data

    On September 5 alone, Ethereum spot ETFs saw a total outflow of $152,700. Grayscale’s Ethereum ETF (ETHE) reported a massive single-day outflow of $7.3895 million, while Grayscale’s mini Ethereum ETF managed a small inflow of $7.2368 million on the same day.

    Impact of ETFs and Ethereum Controversies

    Since their launch, Ethereum ETF products have faced challenges. Institutional investors continue to flock to Bitcoin ETFs, with $5 billion in net inflows since their introduction, while Ethereum ETFs have seen net outflows of around $500 million.

    Furthermore, Ether faces internal controversies due to the Ethereum Foundation (EF), which manages about $650 million in reserves. Recently, Justin Drake mentioned in an AMA that the foundation’s annual expenditure is around $100 million, triggering rumors of insider trading. Vitalik Buterin explained that the plan is to spend around 15% of its remaining funds annually, allowing the foundation to last indefinitely, although its role in the Ethereum ecosystem will diminish over time.

    Ethereum's transition to proof-of-stake (PoS) has brought its own set of challenges, including changes in staking rewards, which may have affected ETH’s price and continued to influence liquidity. External factors, such as Bitcoin's price movements, also significantly impact the Ethereum market.

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