Why is there insufficient demand for ETH after the launch of the Ethereum ETF?

Author: Biraajmaan Tamuly, CoinTelegraph; Compiled by Wuzhu, Golden Finance

Despite the launch of the US spot Ethereum ETF, ETH is about to close in the red, down about 1%.

The US spot Ethereum ETF went live on July 23, and the market immediately reacted, falling 9%. Currently, the price of ETH has fallen 4.05% since its launch. However, other reasons may have hindered price performance.

ETHE's fund outflows are faster than GBTC

According to Sosovalue data, the overall data of ETFs is disappointing, with a total cumulative net inflow of negative $439.64 million.

The chart below highlights that most of the selling pressure is dominated by Grayscale. As of July 29, all other major spot ETH ETFs, including BlackRock, Bitwise and Fidelity, recorded daily positive inflows.

US ETH spot ETF tracking. Source: Sosovalue

We also observed that Grayscale's ETHE outflows have been faster than GBTC since the launch of the spot Bitcoin ETF in January. The chart below highlights the asset losses of both investment vehicles since the conversion.

Chart of asset losses of GBTC and ETHE since the conversion. Source: Glassnode

Some analysts said that Grayscale's massive outflow of ETHE "is likely" to end this week.

Exchanges have "no demand at all" for ETH

In addition, Ethereum's exchange withdrawal volume has fallen sharply since March. Independent analyst Crypto Lion said the metric was highly correlated with price, suggesting “there is simply no demand.” Ethereum exchange withdrawals chart. Source Cryptoquant Crypto Lion believes that the estimated leverage ratio (ELR) has driven ETH’s price action during this volatile period. The metric represents the ratio of open interest in futures contracts to the balance on the corresponding exchange. A higher ELR indicates that futures/perps are leading price action, which is usually short-lived or volatile.

ETH prices have been range-bound following the approval of the ETH ETF. However, in the absence of Withdraws, buying is not recommended despite the unresolved ELR.

Coinbase Premium Index Turns Negative

Coinbase data hints at a similar lack of demand. The Coinbase Premium Index for ETH has been strictly declining in the second quarter of 2024. The index peaked in March at the same time as ETH's year-to-date high, but is currently negative. Negative premium values ​​indicate a lack of buying pressure from U.S. investors and an exhaustion of spot demand.

Ethereum Coinbase Premium Index. Source: Cryptoquant

In May 2024, the potential approval of an Ethereum ETF increased spot buying on Coinbase, which had a bullish impact on its price. The Coinbase Premium Index also surged above 0.15, indicating demand from ETH spot buyers. As mentioned above, the same indicator is now falling, which has an opposite effect on ETH prices.