Ethereum’s EOI is now negative for 2024, after ETH lost 42% of its yearly gains in the past four months.
Ethereum’s ETH $2,294 price is down almost 4% on Sept. 7, and 10% in September, due to multiple headwinds for the second-biggest cryptocurrency.
The collective crypto drawdown on Sept. 6 followed U.S. nonfarm payrolls data, which came in at 142,000, below the forecast of 164,000.
Grayscale keeps driving Ethereum ETF outflows
The ETH price decline also coincided with high Ether ETF outflows during the first week of September, which highlights the current lack of institutional interest in Ethereum.
Grayscale Ethereum Trust was the main source of sell-pressure during the first week of September, with $111 million in spot ETH exchange-traded funds (ETF) net outflows.
As illustrated in the chart, the individual outflows on Sept. 3 and Sept. 4 were the largest over the past month, with $52.3 million and $4.06 million, respectively.
On the other hand, positive netflow was extremely low, with Fidelity witnessing $4.9 million inflows on Sept. 3 and Blackrock registering $4.7 million on Sept. 7.
This lack of demand possibly forced WisdomTree to withdraw its Ethereum Trust S-1 registration. Meanwhile, asset manager VanEck also decided to discontinue its ETH futures ETF, citing factors such as “performance, liquidity, assets under management, and investor interest.”
ETH futures traders double down on shorts
Ethereum has also lacked demand from retail investors over the past month. In the last 30 days, Ethereum netflow across centralized exchanges has been negative $856 million, which indicates a lack of buying pressure.
Meanwhile, future traders looked at the current price action as a short opportunity this month.
Since Sept. 1, Ethereum’s open interest (OI) has progressively increased by 12%, with the funding rate gradually decreasing. During the same period, ETH prices have fallen 10%, which means most traders were aggressively shorting Ether during this past week.
The current OI is as high as on Aug. 27, when ETH prices were around $2,500. An inverse trajectory between OI and price, coupled with a decreasing funding rate, therefore, is possibly responsible for Ethereum’s latest bearish price action.
ETH loses market depth
One key reason Ethereum has struggled to outperform other assets in the second half of 2024 is a decrease in market liquidity.
August’s monthly report from CCdata, a digital asset data and index provider, highlights that the 5% market depth on ETH trading pairs has significantly dropped on centralized exchanges since peaking in June 2024.
The 5% market depth is an indicator to identify buy and sell orders with 5% of the mid-market price. It allows to measure liquidity around, and whether it can be sold or bought near to market prices. A higher 5% market depth indicates strong liquidity and low slippage.
With Ethereum, spot ETFs were expected to improve and have a positive effect on this metric, but that hasn’t been the case, as observed in the chart.
Therefore, ETH price has struggled to regain bullish momentum unless retail interest and volumes return to Ethereum.
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