Why Ethereum ETFs Are Underperforming As ETH Exchange Reserves Grow

• Ethereum ETFs May Underperform Due to Historic Market Downturn in Q3
• Ethereum exchange reserve growth may trigger selling pressure.
• Open interest in Ethereum needs to increase to fuel potential growth.

Ethereum (ETH) rose 1% on Tuesday as ETH exchange-traded funds (ETFs) continued to lag with another day of outflows. Weak flows into ETH ETFs may be related to their historically weak performance in the third quarter. Meanwhile, ETH exchange reserves are also rising after a slow price rally.

Market Drivers Daily Digest: Why Ethereum ETFs Are Underperforming, Exchange Reserves Rising

Ethereum-based ETFs extended their streak of negative outflows to five straight days after recording $5.2 million in outflows on Monday.

Flows were dominated by outflows of $22.6 million from Grayscale ETHE, bringing the total asset losses since the ETH ETF’s launch to $2.69 billion. While other issuers saw zero flows, Fidelity FETH and Grayscale Mini Ethereum Trust saw inflows of $7.6 million and $8 million, respectively.

The weak performance of the spot ETH ETFs has caused concern among investors who expected Ethereum to outperform Bitcoin in the weeks following the launch of the spot BTC ETFs in January. Notably, the ETH ETFs have seen only one day of inflows in the last three weeks of trading and a cumulative outflow of $573 million since launch.

A possible reason for the poor performance could be the historical decline in risk assets in Q3. Therefore, most analysts have suggested that Q3 needs to pass before an accurate analysis of the ETH ETF’s performance can be made.

Meanwhile, Ethereum’s exchange reserve has shown a notable increase, increasing by more than 94,000 ETH worth about $220 million in the last 24 hours. The increase in the crypto asset’s exchange reserve indicates stronger selling pressure and could lead to lower prices. As a result, ETH could face selling pressure in the next few hours.

ETH exchange reserve

ETH Technical Analysis: Ethereum Open Interest Needs to Rise to Fuel Rally Momentum

Ethereum is trading around $2,360 on Tuesday, up 1% on the day. ETH has seen $22.55 million in liquidations over the past 24 hours, with long and short liquidations totaling $4.69 million and $17.86 million, respectively.

Ethereum has succumbed to selling pressure near the $3,400 resistance as it declined immediately after approaching the level. ETH price is also capped by a descending trendline that extends from May to September. ETH needs to break the $3,400 rectangle resistance and the descending trendline to initiate a rally towards the $2,817 resistance level. A successful move above this level could lead to a rally of ETH towards the $3,230 price level.

ETH/USDT 4-hour chart

A daily candle close below $2100 could see ETH fall to the $1544 support level.

The Relative Strength Index (RSI) is above its midline at 53, indicating bullish momentum. The Stochastic Oscillator has moved into oversold territory, indicating a potential short-term price correction.

Meanwhile, Ethereum futures open interest (OI) should also rise to provide support for potential price gains.

Open interest is the total amount of unsettled long and short positions in a derivatives market.

ETH’s OI has fallen more than 38% from its all-time high of $17.09 billion on May 28 to $10.51 billion on Tuesday. Over the same period, ETH has fallen more than 39%. Notably, its OI peaked on news of the SEC’s reversal in approving the ETH ETF. Similar bullish news may be needed to encourage long traders to re-enter the market.

ETH Open Interest

In the short term, ETH could fall to $2,318, which would result in the liquidation of positions worth $28.33 million.