Institutions have taken a lukewarm stance toward Ethereum in 2023, with significant sell-offs of this digital asset dominating the year so far. According to the latest analysis from CoinShares, Ethereum has witnessed outflows of $4.8 million in the past week alone, contributing to a total of $108 million in sales within the year. CoinShares’ head of research, James Butterfill, described Ethereum as the “least loved digital asset” among exchange-traded product (ETP) investors, surpassing its closest rival, Tron, by over $50 million.
CoinShares reveals key details about Ethereum’s struggles
Despite these challenges, the tide may turn soon as Cathie Wood’s Ark Invest applied for the first Ethereum ETF spot in the United States, marking a significant development. This application comes at a time when Ethereum’s network has turned inflationary, and on-chain activity has experienced a decline amid the persistent bear market. Ethereum’s struggles in 2023 are not unique, as sentiment surrounding institutional crypto purchases remains subdued. CoinShares’ weekly report highlights the fourth consecutive week of selling, totaling $59 million in outflows over the past seven days.
The ongoing outflows have now reached $294 million, representing 0.9% of total assets under management (AUM). Most of the selling pressure is originating from North America, with both Canada and the United States collectively offloading $17.6 million and $12.3 million, respectively, in the past week. Meanwhile, Germany leads the selling trend in Europe, with $20 million worth of Ethereum sales. James Butterfill attributes much of the selling to the strength of the U.S. dollar, which has been bolstered by the market’s perception of a “soft landing scenario.”
This perception has resulted in eight consecutive weeks of positive performance for the U.S. dollar. However, Butterfill suggests that as the year progresses, this narrative may change, especially if higher interest rates come into play. Despite an earlier report by CoinShares indicating significant trading activity beneath the surface, recent trading volumes have experienced a sharp decline. CoinShares’ Butterfill notes that volumes have reached exceptionally low levels, averaging just $2.3 billion daily over the past month, compared to the yearly average of $7 billion.
Market trends and the path forward for cryptocurrencies
Over the last week, this decline has become even more pronounced, plummeting by 73% to a daily average of $743 million. This dwindling trading activity suggests the presence of an “apathetic investor,” although Butterfill offers a historical perspective by noting that similar scenarios occurred before the last two Bitcoin halvings. Bitcoin, the flagship cryptocurrency, faced significant headwinds last week, with large institutional players selling off a substantial $69 million worth of the digital asset, despite a positive performance the previous week.
Adding to the bearish sentiment, Bitcoin short products experienced their largest weekly inflows since March, with $15 million flowing into these instruments. Butterfill finds the timing of these inflows intriguing, as it coincides with heightened regulatory uncertainty. Looking ahead, Butterfill speculates that many investors are closely monitoring the Federal Reserve’s decisions on interest rates, with potential dollar weakness likely to provide support for Bitcoin.
CoinShares’ Butterfill also acknowledges the potential for the Consumer Price Index (CPI) to exceed expectations due to a rapid surge in gasoline prices. He also highlights the FTX asset sales as potential “stock overhangs” that may need to be addressed in the coming months. As Ethereum navigates its challenges amidst institutional outflows, the broader cryptocurrency market remains influenced by various macroeconomic factors, regulatory developments, and investor sentiment, setting the stage for an uncertain yet intriguing future.
