4 reasons why Ethereum price has crashed 42% from YTD high
invezz.com 13 September 2024 06:42, UTC Ethereum price has remained in a strong bear market this month amid negative headlines from the biggest chain in the crypto industry. ETH was trading at $2,360 on Friday, down by over 42% from its highest point this year. It is also hovering near its lowest point since February this year.
Ethereum ETF outflows
The first big headline is that Ethereum exchange-traded funds (ETFs) are not doing well two months after launch.
Data compiled by SosoValue shows that these funds have had cumulative outflows of over $582 million since launch. This week, they have had outflows in the last two consecutive days, with the Grayscale Ethereum Trust (ETHE) being the most affected.
ETHE has over $4.1 billion in assets, down from over $10 billion when it was launched. It is followed by the Grayscale Mini Ethereum Fund (ETH), which has over $889 million in assets because of its cheaper expense ratio. The Blackrock Ethereum ETF (ETHA) has $800 million while Fidelity Ethereum ETF (FETH) has $323 million.
There are two main reasons why Ethereum ETFs are not seeing traction among investors. First, they are relatively expensive to have. Grayscale’s ETHE has an expense ratio of 2.5%, which is one of the biggest in the ETF industry. Its ETH ETF, however, has a lower expense ratio of 0.15%, which explains why it has become more popular among investors.
Second, unlike Bitcoin, Ethereum has a feature known as staking, where users deposit their coins and earn monthly rewards. Data by StakingRewardsshows that Ethereum has a staking reward of 3.22%.
Therefore, investors who allocate their cash to Ethereum will do much better than those who buy ETFs. A 3.22% annual return means that an investor with $10,000 invested in Ether can expect to make $322, which is a great return.
However, it is also worth noting that the amount of staked Ethereum has been in a downward trend in the past few weeks, mostly because of the falling prices. Data shows that over 298k ETH worth over $703 million have left staking pools.
Ethereum formed a death cross
The other reason why the ETH price has plunged is that the coin has formed a death cross chart pattern as the 200-day and 50-day Exponential Moving Averages (EMA) have formed a bearish crossover pattern.
In most periods, a death cross is one of the most popular bearish patterns in the financial market. It often leads to a significant drop of an asset. Indeed, Ether has already fallen by over 15% since this cross happened.
Ethereum also formed a double-top chart pattern whose neckline was at $2,815, its lowest level on May 1. The double-top is another highly popular bearish sign in the market. ETH has also crashed below the 61.8% Fibonacci Retracement level.
Therefore, the ETH token will likely remain under pressure in the coming weeks, especially if it drops below the key support at $2,150, its lowest point this month.
Insider sales are rising
The other main reason why Ethereum price has plunged is that insiders have been selling ETH tokens aggressively.
Vitalik Buterin, the network’s creator, has been on a selling spree. He has sold tokens worth almost $10 million in the past few weeks.
Similarly, the Ethereum Foundation has been in a strong selling spree as well. In most cases, investors often sell assets when insiders are selling because of the view that they know something that the broader market does not know.
At the same time, the futures open interest has been in a strong downward trend in the past few weeks. It had an open interest of over $10 billion on Thursday, down by over $17 billion earlier this year. This is a sign of waning demand among investors.
On the positive side, there are signs that the number of Ethereum tokens in exchanges has been in a downward trend. They stand at over 22.61 million, according to data by Nansen. This is a 0.86% drop from the same period last week.
Competition rising
Gone are the days when Ethereum was the only game in town. While it has the biggest market share in key areas, other networks are catching up.
Most recently, Justin Sun’s Tron launched SunPump, whose crypto tokens have a market cap of over $608 million. Sun, the biggest DEX on Tron has seen a strong increase in activity.
Other networks are gaining market share. Base, the layer-2 network launched by Conbase, has attracted millions of wallets from around the world. Other fast-growing Ethereum competitors are Solana and Arbitrum. Solana has become a key player in the DePin industry.
This competition has drawn more investors to these projects. For example, Tron was trading at $0.15, a few points below its all-time high. At the same time, the volume of Ethereum NFTs has dropped sharply in the past few months.
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