Ethereum price has remained in a strong bear market this month amid negative headlines from the crypto industry’s largest network. ETH was trading at $2,360 on Friday, down more than 42% from its highest point this year. It is also hovering near its lowest point since February.
Ethereum ETF Outflow
The first big news is that Ethereum-based exchange-traded funds (ETFs) are not performing well two months after launch.
Data compiled by SosoValue shows that these funds have seen a combined outflow of over $582 million since launch. They have seen outflows for the last two days in a row this week, with Grayscale Ethereum Trust (ETHE) the hardest hit.
ETHE has over $4.1 billion in assets, down from over $10 billion at launch. It’s followed by Grayscale Mini Ethereum Fund (ETH), which has over $889 million in assets due to its cheaper expense ratio. Blackrock Ethereum ETF (ETHA) has $800 million, and Fidelity Ethereum ETF (FETH) has $323 million.
There are two main reasons why Ethereum ETFs are not popular with investors. First, they are relatively expensive. Grayscale’s ETHE has an expense ratio of 2.5%, which is one of the highest in the ETF industry. However, its ETH ETF has a lower expense ratio of 0.15%, which explains why it has become more popular with investors.
Secondly, unlike Bitcoin, Ethereum has a feature known as staking, where users deposit their coins and receive monthly rewards. StakingRewards data shows that Ethereum has a staking reward of 3.22%.
So investors who put their money into Ethereum will get much more than those who buy ETFs. An annualized return of 3.22% means that an investor with $10,000 invested in Ether can expect to get $322, which is an excellent return.
However, it is also worth noting that the amount of Ethereum staked has been trending downwards in recent weeks, largely due to falling prices. The data shows that over 298,000 ETH, worth over $703 million, have left staking pools.
Ethereum Forms Death Cross
Another reason for the ETH price drop is that the coin has formed a death cross pattern on the chart as the 200-day and 50-day exponential moving averages (EMA) have formed a bearish crossover pattern.
In most periods, the death cross is one of the most popular bearish patterns in the financial market. It often leads to a significant drop in the asset. Indeed, Ether has already fallen by more than 15% since this cross occurred.
Ethereum also formed a double top on the chart, with the neckline at $2,815, the lowest level on May 1. The double top is another very popular bearish sign in the market. ETH also crashed below the 61.8% Fibonacci retracement level.
Thus, the ETH token is likely to remain under pressure in the coming weeks, especially if it falls below the key support at $2,150, the lowest level this month.
Insider selling is on the rise
Another major reason for the Ethereum price drop is that insiders are aggressively selling ETH tokens.
Vitalik Buterin, the network’s creator, has been on a selling spree, selling nearly $10 million worth of tokens in the past few weeks.
Similarly, the Ethereum Foundation is also in a strong selling wave. In most cases, investors often sell assets when insiders sell because they believe they know something that the broader market does not.
Meanwhile, futures open interest has been in a strong downward trend in recent weeks. On Thursday, open interest was more than $10 billion, down $17 billion from earlier this year. That’s a sign of declining investor demand.
On the other hand, there are signs that the number of Ethereum tokens on exchanges is trending downward. According to Nansen, there are more than 22.61 million. This is 0.86% less than in the same period last week.
Competition is growing
Gone are the days when Ethereum was the only game in town. While it has the largest market share in key areas, other networks are catching up.
Justin Sun’s Tron recently launched SunPump, which has a crypto token market cap of over $608 million. Sun, the largest DEX on Tron, has seen a significant increase in activity.
Other networks are gaining market share. Base, a layer 2 network launched by Conbase, has attracted millions of wallets worldwide. Other fast-growing competitors to Ethereum include Solana and Arbitrum. Solana has become a key player in the DePin industry.
This competition has attracted more investors to these projects. For example, Tron was trading at $0.15, a few points below its all-time high. At the same time, Ethereum NFT volume has fallen sharply over the past few months.
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