- Ethereum ETFs’ high outflows signify low institutional interest amid declining ETH CME trading volume.
- Ethereum underperforms in terms of risk-adjusted returns compared to Nvidia, Bitcoin, Meta, Gold, NASDAQ-100 and others.
- ETH could follow a key trendline to decline toward $2,100 before staging a rally.
Ethereum (ETH) is up 0.1% on Wednesday following increased outflows and declining trading volume across ETH products. This follows key data showing ETH’s recent underperformance compared to other top assets.
Daily digest market movers: Ethereum ETF outflows, declining ETH CME volume
US spot Ethereum exchange-traded funds (ETFs) recorded outflows on their first trading session after the Labour Day holiday. The products witnessed net outflows of $47.4 million, its highest in the past month, per Farside Investors data.
The negative flows were spearheaded by $52.3 million in outflows from Grayscale’s ETHE. Other issuers saw zero flows except for Fidelity’s FETH, which recorded $4.9 million in inflows. The high ETH ETF outflows align with the general decline across the financial market on Tuesday, where stocks shaved $1 trillion off their market capitalization.
ETH ETF Flows
The consistent switch between zero to negative flows across ETH ETFs also indicates weak demand from institutional investors in Ethereum.
While many attribute the poor performance to a lack of staking within the ETFs, another cohort of investors who don’t consider staking yields are also showing disinterest in ETH. According to CCData, Ethereum’s futures and options Chicago Mercantile Exchange (CME) trading volume in August fell by 28.7% and 37.0% to $14.8 billion and $567 million, respectively — its lowest futures volume since December 2023.
This reflects increasing caution from US investors toward ETH. A possible reason may be ETH’s low risk-adjusted returns compared to other top assets. Assets and stocks like Nvidia (NVDA), Gold, Meta, Bitcoin and the NASDAQ-100 have proven to provide higher risk-adjusted returns than ETH in 2024, per Ecoinometrics data.
Ethereum Risk-Adjusted Returns vs Others
Risk-adjusted return is the metric that measures the return of an investment relative to the risk involved.
Another potential reason could be the historically poor performance of Ethereum and the crypto market in Q3, per Coinglass data. Additionally, crypto community members have been debating about the decreasing Ethereum blockchain revenue since the introduction of blobs space in the Dencun upgrade to help scale Layer 2 networks.
ETH technical analysis: Ethereum could decline to $2,100
Ethereum is trading around $2,450 on Wednesday, up 0.1% on the day. In the past 24 hours, ETH has seen nearly $40 million in liquidations with long and short liquidations accounting for $26 million and over $13 million, respectively.
ETH broke below the support level around $2,400, briefly falling to $2,310 before seeing a quick recovery. This indicates strong buying pressure around the $2,300 price level, as evidenced in IntoTheBlock’s data, which shows investors purchased over 51 million ETH around the price.
ETH/USDT Daily chart
On the daily chart, ETH continues to trade around a key trendline that suggests its price could decline toward $2,100 to $2,200 in the coming weeks. ETH posted similar declines from August to November 2022 and July to October 2023 before staging a rally. If history repeats itself, ETH could decline toward the $2,100 support in September before seeing a rally.
A daily candlestick close above $2,817 will invalidate the thesis.
The Relative Strength Index (RSI) and Stochastic Oscillator (Stoch) are indicating a slight bearish momentum.
In the short term, ETH could rally to $2,410 to liquidate positions worth $28.8 million.
Cryptocurrency metrics FAQs
The developer or creator of each cryptocurrency decides on the total number of tokens that can be minted or issued. Only a certain number of these assets can be minted by mining, staking or other mechanisms. This is defined by the algorithm of the underlying blockchain technology. Since its inception, a total of 19,445,656 BTCs have been mined, which is the circulating supply of Bitcoin. On the other hand, circulating supply can also be decreased via actions such as burning tokens, or mistakenly sending assets to addresses of other incompatible blockchains.
Market capitalization is the result of multiplying the circulating supply of a certain asset by the asset’s current market value. For Bitcoin, the market capitalization at the beginning of August 2023 is above $570 billion, which is the result of the more than 19 million BTC in circulation multiplied by the Bitcoin price around $29,600.
Trading volume refers to the total number of tokens for a specific asset that has been transacted or exchanged between buyers and sellers within set trading hours, for example, 24 hours. It is used to gauge market sentiment, this metric combines all volumes on centralized exchanges and decentralized exchanges. Increasing trading volume often denotes the demand for a certain asset as more people are buying and selling the cryptocurrency.
Funding rates are a concept designed to encourage traders to take positions and ensure perpetual contract prices match spot markets. It defines a mechanism by exchanges to ensure that future prices and index prices periodic payments regularly converge. When the funding rate is positive, the price of the perpetual contract is higher than the mark price. This means traders who are bullish and have opened long positions pay traders who are in short positions. On the other hand, a negative funding rate means perpetual prices are below the mark price, and hence traders with short positions pay traders who have opened long positions.
