Sun, September 08, 2024 at 02:47

• 

  Kang-hoon

  • Hello, Annie.

  • Today, I want to discuss the recent plunge in Ether liquidity on US exchanges since the first spot Ether exchange-traded funds (ETFs) entered the market on July 23, 2024.

  • 
• Annie

  • Oh, that sounds interesting!😊 So, how much has the liquidity dropped?

  
• 

  Kang-hoon

  • Liquidity has plunged by as much as 40%.

  • This is quite significant, considering that traders and analysts initially expected these ETFs to improve market liquidity and stabilize prices.

• Annie

  • Wow, that's a huge drop!😲 What exactly happened to cause this decline?

  
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• 

  Kang-hoon

  • Instead of improving liquidity, the average market depth of 5% for ETH pairs has fallen to around $14 million on US exchanges.

  • Offshore exchanges are also experiencing a similar decline, with liquidity dropping to about $10 million.

• Annie

  • That's quite concerning.

  • What about the ETFs themselves?

  • How have they performed?

  
• 

  Kang-hoon

  • The ETFs have had mixed results.

  • For instance, Grayscale's ETHE ETF witnessed an outflow of $10.7 million, while BlackRock's ETHA ETF saw an inflow of only $4.7 million.

  • Overall, Ether ETFs have suffered from over $500 million in cumulative outflows.

  • 
• Annie

  • Mixed results indeed.

  • So, what does this mean for traders and investors?

  
• 

  Kang-hoon

  • A drop in liquidity is challenging for both traders and investors.

  • In states of low liquidity, slippage is higher, and the cost of execution is greater.

  • This makes the market more volatile and less attractive to institutional investors.

• Annie

  • I see.😕 And how has this affected Ether's price recently?

  
• 

  Kang-hoon

  • As of today, Ether trades at about $2,258, which is down over 4% in the past 24 hours.

  • The wider cryptocurrency market is also under stress, with major altcoins like Solana and Ripple posting losses between 2% to 4%.

• Annie

  • That's quite a downturn.

  • What do you think will happen going forward?

  
• 

  Kang-hoon

  • Going forward, market participants will likely focus on how potential interest rate cuts by the Federal Reserve might affect liquidity and trading activity.

  • However, the expected benefits of the ETF introductions have not materialized for Ether, which could mean continued volatility.

• Annie

  • So, would you say this news is more of a negative development for the market?

  
• 

  Kang-hoon

  • Yes, I would classify this as a negative development.

  • The decline in liquidity and the mixed performance of the ETFs indicate that the market is still facing significant challenges.

  • This could lead to further volatility and make it difficult for investors to navigate.

• Annie

  • Thank you for the detailed explanation, Kang-hoon.

  • This really helps me understand the current market situation better.🙏

  
• 

  Kang-hoon

  • You're welcome, Annie.

  • Always happy to help clarify these complex issues.

  • Upon comprehensive consideration, this news is perceived as a 😱Bearish.