Ether liquidity drops 20% on exchanges post-ETF

Ether liquidity has plummeted 20% since the debut of nine Ethereum ETFs on July 23. Despite Bitcoin’s success with spot ETFs earlier this year, the Ethereum market didn’t experience the same. 

Data from CCData shows that the 5% market depth for ETH pairs on American centralized exchanges has dipped to $14 million. Offshore, the situation is nearly the same, with liquidity down 19% to about $10 million. 

This has made it easier to swing the Ether spot price by 5%, increasing its sensitivity to large trades. CCData analysts say:

“Although market liquidity for ETH pairs on centralized exchanges is still higher than at the start of the year, liquidity has dipped by almost 45% since June’s peak.”

On September 5 alone, Ethereum spot ETFs saw a total outflow of $152,700. Grayscale’s Ethereum ETF (ETHE) reported a massive single-day outflow of $7.3895 million, while Grayscale’s mini Ethereum ETF managed a small inflow of $7.2368 million on the same day.

It’s been a rough ride with these products since their launch. Institutional investors have and are still flocking to Bitcoin ETFs, with $5 billion in net inflows since their introduction. In comparison, Ethereum ETFs have seen net outflows of around $500 million.

As if it wasn’t enough, Ether is also facing controversies thanks to the Ethereum Foundation (EF), which manages about $650 million in reserves. 

Recently, Justin Drake mentioned in an AMA that the foundation’s annual expenditure is around $100 million, and that triggered rumors of insider trading that even dragged Vitalik Buterin into it, who explained that the plan is to spend around 15% of its remaining funds annually.

This allows the foundation to last indefinitely, but over time, its role in the Ethereum ecosystem will become smaller.

Ethereum’s transition to proof-of-stake (PoS) has brought its own set of challenges. Staking rewards changed, which has had some effect on Ether’s price. There’s a chance it played a role in the liquidity drop it’s still struggling with too.

It doesn’t help that the wider crypto market is still heavily driven by Bitcoin’s price movements. When BTC moves, everything else tends to follow, including Ether.