The launch of ether (ETH) exchange-traded funds (ETFs) in the United States has not resulted in the expected boost to market liquidity. In fact, data shows that the liquidity of ETH pairs on centralized exchanges has declined by nearly 20% since the debut of nine ETFs on July 23rd.
This unexpected development contrasts with the positive impact that ETFs had on bitcoin (BTC) market liquidity following their approval in January. While ETH ETFs initially saw some inflows, they have since experienced a cumulative outflow of over $500 million, contributing to a 25% decline in ETH’s price.
According to CCData, the average 5% market depth for ETH pairs on U.S.-based centralized exchanges has decreased from roughly $18 million to $14 million since the ETFs’ introduction. This indicates that it is now easier to move the spot price of ETH by 5% in either direction, suggesting reduced liquidity and increased sensitivity to large orders.
Jacob Joseph, a research analyst at CCData, attributed the decline in liquidity to poor market conditions and the typical seasonal slowdown in trading activity during the summer months. However, it’s worth noting that the overall liquidity for ETH pairs remains higher than it was at the beginning of the year.
Also Read: BlackRock’s Bitcoin ETF Suffers Second-Largest Outflow of $13.5M Amid Price BTC Price Dip
The decrease in market liquidity for ETH ETFs could have implications for both retail and institutional investors. Reduced liquidity can lead to wider bid-ask spreads, higher trading costs, and increased price volatility. It’s essential for investors to be aware of these potential risks when trading ETH ETFs.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
About The Author
