The past weeks have been unfavorable for altcoins, most of which have reached new annual lows. Let's look at the reasons and consequences of this phenomenon.
Why is Ether Falling?
Ethereum (ETH) continues to fall due to outflows from ETF funds. Since their trading began on July 23, outflows from ETH ETFs, mainly from Grayscale, have reached $420.5 million. However, Nansen analysts also mention other reasons for the drop in the spot price. Aurelie Barthere, head research analyst at Nansen, explains that the significant weakening of investors' risk appetite has caused substantial price erosion. quote: {"CITE_W_A": "BTC has dropped 14% since July 23. In my view, the decline in ETH price is not much related to the ETF launch. It is more about fatigue and relaxation in risk appetite."}
The Future of Cryptocurrencies
In the short and medium term, many negative factors have undermined investors' risk appetite. From non-buyers' sales to US data negatively impacting the outlook, all of this has eroded investors' enthusiasm. Investors who bought BTC near the lows saw larger sales before reaching reasonable profit levels. Interest gradually weakened during rises, and panic sales accelerated in the opposite direction. This caused ETH and altcoin prices to constantly retract. However, historical data shows that such psychologically challenging periods are normal.
Expert Opinions
Aurelie Barthere from Nansen also emphasizes that the sales are not unique to cryptocurrencies: quote: {"CITE_W_A": "We know that the first wave of sales in March led to losses, especially among investors interested in many crypto narratives. Then, a second wave of sales occurred in July-August in correlation with stocks. This happened in an environment where growth in the US is still strong but slowing, and valuations in traditional risk assets like US stocks are stretched. In my view, it is still uncertain whether we are just experiencing a consolidation pause or if crypto prices have peaked. If the Fed can lower rates while growth continues, the bull market in crypto and stocks will likely continue. If there is a sharper slowdown in growth, there will be less upside for risk assets."}
The current situation on the cryptocurrency market shows that a significant decrease in risk appetite among investors is putting strong pressure on prices. The future of the market will depend on many factors, including Fed policy and overall economic conditions.
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