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Ethereum ETFs Scored $49M Inflows as ETH Plunged
Gerry Rafferty
August 08, 2024
Ethereum ETFs Scored $49M Inflows as ETH Plunged
On Monday, U.S.-listed spot ether (ETH) exchange-traded funds (ETFs) saw net inflows nearing $49 million, even as ether's price plummeted by 20%, marking its steepest drop since 2021. This decline was spurred by the crypto trading firm Jump Crypto transferring substantial amounts of ether to centralized exchanges, possibly in preparation for selling. Furthermore, the wider cryptocurrency market faced a downturn, with over $340 million in ETH futures liquidations intensifying the selling pressure.
Despite the sharp price drop, professional investors seized the opportunity to buy the dip. According to data from SoSoValue, the trading volume for ETH ETFs exceeded $715 million, the highest level since July 30. Notably, BlackRock's ETHA ETF led the inflows with $47 million, while both Fidelity's FETH and VanEck's ETHV saw inflows of $16 million each. In contrast, Grayscale's ETHE had a net outflow of $46 million, although its smaller Ethereum Mini Trust (ETH) recorded inflows of $7 million.
While these ETH ETFs have collectively faced net outflows of $460 million since their launch on July 23, indicating a lack of long-term demand for ether ETFs, Bitcoin ETFs fared better, amassing over $1 billion in net inflows within their first 12 trading days.
Market observers noted that applications built on the Ethereum network demonstrated resilience amid the market's turbulence, indicating robust fundamentals. “Ether’s steep decline was primarily driven by the Jump Crypto sell-off,” stated Alice Liu, a lead researcher at CoinMarketCap. She also noted that liquid staking derivatives finance (LSDFi) showed stability during this stressful period. Liu pointed out that the recent liquidations appeared to have sparked renewed activity in the decentralized finance (DeFi) market, with Ethereum gas fees dropping to a more manageable level of 10-15 Gwei after peaking at 370 Gwei.
Bitcoin volatility hits 20-month high, traders hedge against further slump
A prominent Bitcoin volatility indicator surged to its highest level in 20 months as Bitcoin's price dropped below $50,000, prompting futures traders to anticipate potential further declines. On August 5, the Bitcoin Volmex Implied Volatility Index reached 97.14, coinciding with Bitcoin's brief dip to $49,813, according to CoinMarketCap. This marks the highest volatility level since the collapse of the FTX exchange in November 2022.
Although Bitcoin has since recovered to around $56,676, futures traders remain cautious, indicating bearish sentiment. Ed Hindi, the chief investment officer at Tyr Capital, noted that traders are actively purchasing puts and put spreads on both Bitcoin and Ethereum to safeguard against potential losses. The put-to-call volume ratio, which measures the demand for put versus call options, currently stands at 46.94% calls and 53.06% puts, yielding a put-to-call ratio of 1.13, as per CoinGlass data. Hindi pointed out that the heightened demand for puts may suggest the market is overextended.
While some analysts predict further downside risks for Bitcoin, Hindi believes it is unlikely to drop below $45,000, depending on the unwinding of the Japanese Yen carry trade. However, another metric reveals a 39.73% decrease in Bitcoin options volume over 24 hours on August 6, indicating uncertainty among traders about Bitcoin's future direction.
Despite these concerns, a segment of traders remains bullish. Some anticipate sideways movement or even a near-term recovery. A pseudonymous trader known as RektProof suggested that major sell-offs could lead to a price stall, creating a trading range. Similarly, Vivek Sen, founder of Bitgrow Lab, expressed optimism, stating, “Expect a HUGE reversal soon.” This dichotomy in trader sentiment reflects the ongoing volatility and uncertainty surrounding Bitcoin's market trajectory.
Web3 ecosystem thrives as AI DApps capture 28% market share
Despite the current challenges in the crypto and economic landscape, the Web3 ecosystem demonstrates notable resilience and growth. A significant trend emerging within the decentralized application (DApp) industry is the rise of AI-based DApps, which now command a remarkable 28% of daily activity in the Web3 space, according to DappRadar’s DApp Industry Report for July 2024.
Traditionally dominant, the gaming sector has lost its leading position for the first time in over a year, now accounting for only 26% of the DApp market. This decline has allowed the "Other" category, predominantly featuring AI DApps like DIN and Alaya AI, to take the lead.
DApps within the gaming sector utilize blockchain technology to provide players with true ownership of their in-game assets, represented as non-fungible tokens (NFTs), which can be traded or sold outside the game's ecosystem.
Meanwhile, the Daily Unique Active Wallets (dUAW) in the DApp industry have surged to a record 15.9 million, reflecting a 78% increase from the previous month. This uptick indicates heightened interest in decentralized applications across various sectors.
AI DApps are reshaping the Web3 landscape by introducing innovative solutions that leverage artificial intelligence for enhanced user experiences. Moreover, the social sector has gained traction, now representing 20% of the DApp industry with 3.1 million daily active users. This growth underscores the potential of blockchain technology to promote security, transparency, and data ownership in decentralized applications.
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