Ethereum Faces Downward Trend Amid Increased Coin Issuance and Disappointing ETF Launch
Summary:
Ether (ETH), Ethereum's native currency, has seen an 8.2% decline in price due to various factors, including increased coin issuance, sales by Vitalik Buterin, and a weaker than expected first week for the futures-based ETF. Updates to Ethereum's coin issuance resulted in fewer new coins and a burning mechanism introduced. However, lowered network activity has seen an increased supply of ETH. Additionally, Buterin's significant currency sales and the Ethereum Foundation's sales have added to the negative market sentiment. The recent lawsuits against Binance and Coinbase, coupled with the weak launch of Ethereum futures-based Ether ETFs, further contribute to the declining performance of Ether.
Ethereum's own coin, Ether (ETH), saw a decrease in price of 8.2% from October 2nd to the 9th. The coin's fall in price can be tied to several factors, including an increased issuance of coins due to standard monetary policy, notable sales from Vitalik Buterin and a lackluster first week for the futures-based exchange-traded fund (ETF).
In 2022, Ethereum underwent significant system changes that adjusted the way coins were issued. This change drastically lowered the number of new Ether coins being issued, while at the same time introducing a mechanism to burn, or remove, existing coins from the supply.
This new issuance schedule has been dubbed "ultrasound money" by Ethereum supporters, given the fact that more coins were burned than issued for most of 2023, causing a net decrease in total Ether coin supply. However, this policy's unpredictability proved to be a shortcoming.
A reversal occurred in September 2023 with coin issuance as the dynamic base fees dropped due to decreased network use. Data from Ethereum analysis provider, ultrasound.money, showed an increase of 30,064 Ether coins in supply over the past month due to lowered burn activity.
Despite the drop in transaction demand, Ethereum's systems are operating as intended with no unexpected changes causing this decrease. Persistent network congestion resulting in high fees is partially to blame, a problem only partially mitigated by layer-2 scaling solutions.
An investigation by Arkham analytics points towards an address linked to Vitalik Buterin depositing 3,999 ETH to exchanges over the past five weeks, a total approximate worth of $6.4 million. This substantial transaction has left many speculating on the reasoning behind it.
The most recent transaction on Oct. 7 gives the impression that the Ether coins were likely exchanged for real-world currency on Bitstamp. The address linked to these transactions still holds 36,000 Ether coins, an equal amount of $57.2 million.
The Ethereum Foundation has also just made a sale, trading 1,700 Ether coins for $2.74 million in stablecoins via Uniswap on Oct. 9. Analysts believe this sale aligns with the foundation's usual operational costs, grants and incentives.
The demand for the ETH futures ETF has also seen a drop. An address linked to a former FTX hacker, who originally possessed 175,496 ETH, transferred a large amount to the THORChain router before converting it into Threshold Network's tBTC, a tokenized version of Bitcoin (BTC). Following advice from counselors and legal representatives, THORSwap halted conversion transactions on Oct. 6.
While there are many theories as to why this happened, there seems to be no explanation for the conversion of Ether into a tokenized version of Bitcoin other than expecting a higher return in fiat currency. Despite the recent surge in Ether's supply, its price trend compared to Bitcoin hasn't looked promising since November 2022.
Ether's performance has been weaker than Bitcoin over the past 11 months by 25.7%, causing a dip in the ETH/BTC ratio to fall under the 0.06 support level. This coupled with legal action by the U.S. Securities and Exchange Commission against Binance and Coinbase in June of 2023 have contributed to negative sentiment around Ether's price.
Adding to this, the Ether ETFs launch on the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE) on Oct. 2 brought in less than $10 million in total assets during the first week.
It's clear that the narrative around Ether has been primarily negative lately, leading to its poor performance. The factors contributing to this include the return of net coin issuance, legal concerns for coins and exchanges, sales from Vitalik and the Ethereum Foundation and weak demand for the futures-based ETF.
This article is not intended as financial advice or recommendations. Investing and trading always involve risk, and individuals should do their own research before making any big decisions.
Published At
10/9/2023 9:34:25 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.