Why Did $ETH’s Price Drop 26% Since ETF Launch?

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The launch of Ethereum ETFs was meant to usher in a new era of crypto adoption and spur demand for the second-ranked cryptocurrency.

So why has $ETH’s price dropped 26% since the $ETH ETFs launched in late July?

Time to explore the difference between market responses to $BTC and $ETH ETFs, and what it says about investor sentiment.

$ETH Price Decline and Broader Investor Sentiment

The recent drop in $ETH’s price (over 26% since the launch of US spot $ETH ETFs), is largely attributed to poor investor sentiment and a lack of risk appetite.

$ETH ETFs saw huge opening trading volumes at first. But those volumes quickly gave way to net outflows from the nine $ETH ETFs.

Why the sudden turn? Analysts point to broader economic factors, such as interest rate hikes by the Bank of Japan and overall market sell-offs (which also impacted traditional equities).

These broader economic conditions have contributed to a decline in risk assets, including cryptocurrencies.

$ETH Upgrade Woes – Did Dencun Influence Ethereum’s Dump?

Ethereum continues with a long-standing program of protocol upgrades. But ever since the most recent ‘Dencun’ update in March, $ETH’s price has struggled to gain momentum.

In fact, the day Dencun launched (March 13), $ETH reached 2024 highs of nearly $4K. It hasn’t passed that mark since, dumping as low as $2,336, and currently trades at $2,664.

ETFs Launch, a Mixed Market Response Between $BTC and $ETH

The U.S. spot Ether ETF launch contrasts with the Bitcoin ETF launch, which had a more positive impact on Bitcoin’s price.

It indicates the differing market dynamics between the two cryptocurrencies, especially their reputation among financial institutions, which is currently lacking for $ETH.

Other factors contributed to $ETH’s stagnant journey after its ETFs hit the market:

1. By launching at the end of July, $ETH ETFs hit the market shortly before the Bank of Japan raised interest rates and sparked a global sell-off.
2. $ETH ETF outflows led to heavy selling pressure.
3. $ETH ETFs failed to capture attention in the way that $BTC ETFs have.

That said, $ETH ETF total assets under management (AUM) have remained relatively stable after initially decreasing at launch.

Individual funds are also seeing success. BlackRock, which just surpassed Grayscale in combined AUM for its $BTC and $ETH ETFs, shows steady growth in its $ETHA fund.

Where Will $ETH Go From Here?

Whether the recent price drop marks the end of the bull market or a temporary correction is uncertain. Even analysts are split on which is more likely.

Given crypto’s inherent volatility, the future of crypto prices may all come down to the U.S. Federal Reserve cutting interest rates in September or leaving them be.

Depending on how the crypto industry reacts, expect more volatility – and potential opportunities –ahead.

References

• $1B In Trading Volume for ETH ETFs (Nansen, X.com)
• Spot Ethereum ETF Flows (TheBlock)
• Ethereum Price Today (CoinMarketCap)