Weeks After Ether ETF Debut, ETH Market Liquidity Has Dropped by 20%

As an analyst with over two decades of experience in the financial markets, I’ve seen many market developments that have left me both awestruck and puzzled. The recent introduction of Ether ETFs in the U.S. was one such event that seemed promising yet intriguing, given its potential impact on liquidity.

According to a report by CoinDesk in December 2023, it was predicted that Exchange-traded funds (ETFs) would enhance market liquidity significantly. This means that large buy and sell orders could be executed more easily at consistent prices once these ETFs were approved in the U.S.

The increase in liquidity for bitcoin was noticeable after the introduction of spot ETFs on January 11th. Contrarily, for ether, the situation unfolded differently. Since the launch of nine ETFs on July 23rd, data from CCData shows a decrease in ether’s order book liquidity.

After ETFs were introduced, the typical market depth for Ethereum pairs on U.S. exchanges has decreased by about 20%, dropping from approximately $35 million to $14 million. Similarly, on offshore exchanges, it has declined by 19%, going from around $44 million to $10 million. This means that it is now simpler to significantly impact the current price by 5% in either direction, indicating reduced liquidity and increased vulnerability to large orders, suggesting less market stability.

Since July 23, Ether ETFs have seen a total withdrawal of more than $500 million, as indicated by Farside Investors’ data tracking. Meanwhile, the value of Ether has dropped by approximately 25%, reaching $2,380, according to CoinDesk statistics.