Ethereum (ETH) has experienced a decline in value this week due to several cryptocurrency liquidations. Although many of these withdrawals can be linked to the overall negative market mood, institutional investors significantly influence Ethereum’s broader adoption.
In 2021, the SEC in the United States granted approval for Bitcoin (BTC) spot Exchange-Traded Funds (ETFs). These approvals attracted a large number of traditional investors to the market. Spot ETFs have also increased the perceived legitimacy of Bitcoin by allaying initial fears and uncertainties regarding regulation.
ETFs investing in spots for Bitcoin and other cryptocurrencies drove up market prices, reaching a new peak of over $72,000. Enthusiastic buyers projected even higher values. This surge in investment led institutions to focus on Ethereum as well.
Reduced Institutional Flows
This year, there has been increasing demand among institutional investors for Ethereum to be included in an Exchange Traded Fund (ETF), driven by several applications to the SEC. The reason for this interest is Ethereum’s staking feature, which they believe will boost the asset’s price. Furthermore, as the largest smart contract network, there is expected to be a significant increase in on-chain decentralized finance (DeFi) activities, which could also contribute to a rise in Ethereum’s value.
In the past few weeks, the value of the assets has significantly dropped, leading to substantial withdrawals from the institutional products of the company. According to a report by CoinShares on April 15, there was an outflow of $22 million from Ethereum alone during the previous week. This brings the total exits for the month up to $51.3 million. However, the year-to-date withdrawals amount to only $23 million.
Recently, investors showed signs of uncertainty as the upward price trend came to a halt. There was a slight decrease in investments in digital asset products amounting to US$126 million.
Get our insights in our full report as well as more data by region, issuer and asset:
— CoinShares (@CoinSharesCo) April 15, 2024
Many experts believe that Ethereum’s asset under management (AUM) growth hasn’t kept pace with Bitcoin’s in the previous year, especially during Q4 2023 when Bitcoin experienced significant gains due to the market’s expectation of a spot Bitcoin ETF approval. In contrast, Ethereum’s AUM stands at $13.8 billion, despite heightened anticipations for its products.
Ethereum Price To Recover?
The cost of Ethereum has decreased recently because of larger economic issues and less optimistic investor feelings. However, institutional investments have kept the situation relatively unchanged. Currently, Ethereum is valued at $3,052, which represents a 13% decrease in price this week and a 15% drop over the past month.
The approval of an Ethereum ETF in the US keeps bulls hopeful for a potential surge in the cryptocurrency’s price. Furthermore, a robust market trend would spur increased institutional investments in Ethereum due to the ripple effect on decentralized finance transactions.
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2024-04-17 17:19