Ether’s Price Decline Driven by Investor Sentiment Amid Macroeconomic Factors

The recent decline in Ether’s price appears to be influenced more by a general lack of investor enthusiasm than by substantial outflows from exchange-traded funds (ETFs) linked to Ether.

Current Market Dynamics

Ether’s value has decreased over 26% since the introduction of US spot Ether ETFs, which began trading on July 23. During this period, these ETFs recorded a total of approximately $420.5 million in net outflows.

However, industry experts suggest that the decline is not primarily due to the ETF outflows, but rather the broader investor sentiment. Aurelie Barthere, a principal research analyst at Nansen, noted:

“BTC has been down by 14% since July 23. My interpretation is that there is a fatigue regarding risk appetite, which is independent of the ETF launch.”

Initially, investors had high expectations for price surges following the launch of Ether ETFs. For instance, Bitcoin saw ETFs account for about 75% of new investments earlier in the year as its price surpassed $50,000.

Nonetheless, Ether’s price dropped to $2,587 by 12:14 PM UTC on August 19, falling from $3,500 on July 23 when the ETFs were approved.

Impact of Traditional Markets

The cryptocurrency market is still reeling from a significant $510 billion sell-off that has erased much of the gains made in 2024 for the fifty largest cryptocurrencies, impacting both Bitcoin and Ether prices significantly.

This decline was not limited to cryptocurrencies but was tied to movements in traditional equity markets, as described by Barthere:

“The initial sell-off in March led to realized losses among traders engaged in various crypto narratives. Then a second sell-off correlated with equities occurred between July and August—this is happening against a backdrop of solid but slowing growth in the US and elevated valuations in traditional risk assets.”

Other contributing factors to the crypto sell-off include interest rate increases by the Bank of Japan, which raised rates from 0% to 0.25% on August 5.

Additionally, five major market makers sold a combined total of 130,000 Ether, worth an estimated $290 million, since August 3—while Ether’s price plummeted from $3,000 to below $2,200.

Are We Witnessing the End of the Bull Market?

The current state of cryptocurrency prices suggests that markets could either be experiencing a temporary correction or signaling the end of the bull market. This is heavily influenced by expectations regarding the Federal Reserve’s monetary policy decisions, as outlined by Barthere:

“I am uncertain if we are merely taking a pause for consolidation or if crypto prices have reached their peak. If the Fed can implement cuts while growth remains steady, we could see continued bullish trends in both crypto and equities. Conversely, any significant deceleration in growth could limit upside potential for risk assets.”

Some analysts project that the current crypto bull market may persist until the third quarter of 2025. Companies like Bybit and BlockScholes believe Bitcoin’s rally could continue for another 350 days, based on their analysis of price trends.