Ethereum ETP

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Ethereum, the second-largest cryptocurrency, has been facing a significant drop in interest among investors lately. According to a recent analysis by CoinShares, Ethereum saw a total outflow of $4.8 million in the past week, adding up to a substantial $108 million in sales for the year.

This has made Ethereum the least preferred digital asset among exchange-traded product (ETP) investors, according to James Butterfill, CoinShares’ Head of Research. Interestingly, Ethereum’s outflows have exceeded those of Tron, the second-ranking digital asset, by over $50 million.

However, there might be a change in the air with Ark Invest, led by Cathie Wood, applying for the first Ethereum Exchange-Traded Fund (ETF) in the United States. This development comes at a time when the Ethereum network has shifted to an inflationary phase and on-chain activity has dwindled during the ongoing bear market.

Despite these developments, the overall sentiment toward institutional involvement in the cryptocurrency market remains pessimistic. CoinShares’ weekly report highlights a fourth consecutive week of institutional selling, resulting in outflows of $59 million in the past seven days. In total, institutional investors have pulled out $294 million, which accounts for about 0.9% of the total assets under management (AUM).

The primary source of selling pressure has been North America, with both Canada and the United States experiencing significant outflows of $17.6 million and $12.3 million, respectively, in the past week. Germany has also contributed substantially to the European context, with sales amounting to $20 million.

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James Butterfill explained that the driving force behind this extensive selling spree is the strength of the U.S. dollar, which has been boosted by market confidence in a “soft landing scenario.” This confidence is evident in eight consecutive weeks of positive performance. However, Butterfill anticipates a possible shift in this perception by the end of the year, especially if higher interest rates come into play.

Despite an earlier report from CoinShares indicating increased trading activity with volumes surging by 90% to $2.8 billion, the most recent week has seen a sharp decline in trading activity. Daily trading volumes have averaged “just” $2.3 billion over the past month, a significant drop compared to the annual average of $7 billion. In the past seven days, volumes plummeted by 73% to $743 million.

Butterfill suggests that this trend reflects a sense of indifference among investors. However, he acknowledges that similar scenarios have occurred in the cryptocurrency market before the last two Bitcoin halving events. Interestingly, Bitcoin was the most affected cryptocurrency asset during the previous week, with large entities selling a significant $69 million worth of Bitcoin, despite its positive performance in the preceding week.

Looking ahead, Butterfill speculates that many investors are closely monitoring the Federal Reserve’s decisions regarding interest rates this month, with the potential weakness in the U.S. dollar likely to support Bitcoin prices. However, he also highlights concerns about the Consumer Price Index (CPI) figures exceeding expectations due to a rapid surge in gasoline prices. Additionally, there are worries about potential overhangs in FTX asset sales.