Institutional investors have shown a tepid response towards Ethereum in 2023, leading to a year dominated by significant sell-offs of this digital asset. According to CoinShares' latest analysis, Ethereum has seen outflows of $4.8 million in the past week alone, contributing to a total of $108 million in sales within the year. James Butterfill, CoinShares' head of research, described Ethereum as the “least loved digital asset” among exchange-traded product (ETP) investors, surpassing its closest rival, Tron, by over $50 million.
Despite these challenges, the situation may soon change as Cathie Wood's Ark Invest has applied for the first Ethereum ETF spot in the United States. 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.
CoinShares' weekly report highlights a 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 this selling pressure is originating from North America, with Canada and the United States collectively offloading $17.6 million and $12.3 million respectively in the past week. Germany leads the selling trend in Europe with $20 million worth of Ethereum sales.
Butterfill attributes much of this 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.
Trading volumes have seen a sharp decline recently. 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. Over the last week, this decline has become even more pronounced, plummeting by 73% to a daily average of $743 million.
Bitcoin, the flagship cryptocurrency, also faced significant headwinds last week, with large institutional players selling off a substantial $69 million worth of the digital asset. 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.
As Ethereum navigates its challenges amidst institutional outflows, the broader cryptocurrency market remains influenced by various macroeconomic factors, regulatory developments, and investor sentiment.
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