Key Points
- Ethereum ETFs have not increased investor interest or liquidity as expected, with ETH liquidity dropping 20%.
- Ethereum’s price is under selling pressure, slipping below $2,400 levels.
Despite high hopes for the introduction of Ethereum ETFs in July, the liquidity of the asset class has not improved as anticipated. The ETFs have seen little to no inflow over recent weeks, contrary to expectations.
Ethereum ETFs and Liquidity
The successful launch of Bitcoin ETFs in January was largely due to a boost in liquidity. However, the situation with Ethereum ETFs has been different. Since their debut on July 23, the liquidity of Ethereum has been decreasing, according to data from London-based CCData. The combined net outflows from all Ethereum ETFs in the US since their launch amount to $500 million.
Following the ETF launch, the average 5% market depth for ETH pairs on US-based centralized exchanges has fallen by 20% to roughly $14 million. On offshore centralized platforms, the market depth has decreased by 19% to approximately $10 million. This drop indicates that it’s now easier to shift the spot Ether price by 5% in either direction, potentially leading to a drop in liquidity and increased volatility during large trades. Jacob Joseph, a research analyst at CCData, explained:
“Although the market liquidity for ETH pairs on centralized exchanges is still higher than at the start of the year, liquidity has fallen nearly 45% since its peak in June. This is likely due to poor market conditions and seasonal effects in the summer, often accompanied by lower trading activity.”
Lower depth for an asset class typically indicates low liquidity and higher slippages, while higher depth signifies strong liquidity and lower slippages.
Ethereum Price Under Pressure
With weak support from Ethereum ETFs, the price of Ethereum (ETH) has faced selling pressure, dropping below $2,400. As of Friday, 125,000 ETH options will expire with a put-call ratio of 0.63, a max pain point of $2,500, and a notional value of $290 million.
The overall weakness in the crypto market this week is evident in the options data, with the max pain point aligning with recent price declines, indicating a lag in adjustments.
