Ethereum News: Why Ether’s Liquidity Is Plummeting Despite ETF Launch

The post Ethereum News: Why Ether’s Liquidity Is Plummeting Despite ETF Launch appeared first on Coinpedia Fintech News

Following the introduction of spot ether ETFs in the U.S. on July 23, the liquidity in the ether market has dropped significantly. The average 5% market depth for ETH pairs on U.S.-based exchanges has fallen by 20%, now around $14 million.

This figure has decreased by 19% on offshore platforms, bringing it to approximately $10 million. This decline reflects a reduction in the market’s ability to handle large buy and sell orders without impacting the spot price, signaling weaker liquidity and higher market sensitivity to large trades.

The past few weeks have seen a series of concerning developments. Bitcoin, often seen as a barometer for the entire market, has struggled to maintain its momentum. Ethereum, which had shown some resilience, is now also crumbling due to the bearish pressure.

Let’s figure out what’s causing such jitters in the market!

Factors Behind the Decline

The drop in liquidity is a mix of poor market conditions and seasonal factors, particularly the lower trading activity typical during the summer months. Despite expectations that the introduction of ETFs would enhance market liquidity—similar to the positive effects observed in the bitcoin market following its ETF debut in January—the outcome for ether has been different.

As Jacob Joseph, a research analyst at CCData, explained, the liquidity for ETH pairs is now nearly 45% lower than its peak in June. This suggests that the anticipated benefits of ETFs for ether have not materialized as hoped.

Ethereum ETF

Meanwhile, the ether ETF market has seen over $500 million in outflows since the launch, adding to the overall negative sentiment. Ether’s price has also dropped significantly, falling over 25% to $2,380. This price decline and reduced liquidity highlight the challenges ether faces despite the introduction of ETFs. 

Conversely, if central banks keep loosening up, we might see serious inflows into BTC, ETH ETFs, and the major cryptos.

What’s your take on how this could play out for altcoins?