Ethereum's sharp drop is the "culprit"? Founder Vitalik Buterin continues to sell and is questioned

According to data tracked by Lookonchain, Ethereum co-founder Vitalik Buterin moved about $10 million worth of Ether to wallets associated with cryptocurrency exchanges in August.

In addition, data from Arkham Intelligence shows that about 422,000 ETH (worth $1.04 billion as of September 1, 2024) has flowed out of Buterin's Ether address since 2015. More than 840,000 ETH has flowed out of the address in the past two years.

The transfers have fueled speculation that Buterin has been selling his Ether holdings to realize profits in Ether, especially as the cryptocurrency is trading 180% higher than its 2022 cycle low of $885.

Nevertheless, Buterin denied the allegations.

I have never sold ETH for profit since 2018 - Vitalik, August 31, Buterin clarified that he has never sold his Ether holdings for profit, noting that all his ETH transfers since 2018 have been to support various projects he believes are valuable, whether within the "Ethereum ecosystem or broader charities."

Interestingly, the August transfers coincided with the transfer of 84,000 ETH, valued at more than $207 million, from the official Ethereum Foundation address to cryptocurrency exchanges.

The culprit?

The Ethereum Foundation regularly sells some of its ETH holdings to fund development, research, and other initiatives critical to the ecosystem.

However, large Ether transfers can sometimes cause short-term market reactions as investors may interpret them as impending selling pressure.

For example, in November 2021, the Ethereum Foundation transferred 20,000 ETH (valued at approximately $95 million) to Kraken.

These transfers occurred before the peak in ETH prices, which were followed by an 85% price correction, suggesting that the Ethereum Foundation’s sale of its ETH holdings—regardless of its intentions—led to the ETH market’s decline.

Similarly, in May 2021, the Ethereum Foundation sold 350,000 ETH, following a 50% drop in ETH market prices.

However, not all of the Ethereum Foundation’s sales occurred before major market corrections.

For example, around December 2020, when it sold a huge amount of ETH, Ethereum recorded a 630% price increase. Other factors for the surge in Ethereum prices include the launch of the Beacon chain, which marks Ethereum's shift to proof-of-stake, and the U.S. Federal Reserve's loose monetary policy, which has stimulated demand for risky assets including cryptocurrencies.

Interestingly, Vitalik Buterin and the Ethereum Foundation's recent ether sales come at a time when the Federal Reserve is planning to cut interest rates, and outflows from spot Ethereum exchange-traded funds (ETFs) are slowing.

The foundation is out of money

According to the latest report of the Ethereum Foundation, in the fourth quarter of 2023, the Ethereum Foundation allocated $30 million. In the third quarter of 2023, the Ethereum Foundation allocated $8.9 million.

It has to be said that although Polkadot has faced controversy due to its crazy spending (related reading: Polkadot's first-half financial report has caused controversy: $87 million in spending accounted for nearly half of the promotion expenses, and revenue was only $1.1 million), at least its reports are transparent and can be checked.

In addition, if the current annual spending rate of $100 million is followed, the Ethereum Foundation will run out of ETH in 8 years. If you want to provide longer-term funding for operations, either the price of ETH will rise or you will start staking to earn income.