- Ethereum price fell 22% in August.
- The lack of institutional demand at current prices is a problem, says Quinn Thompson of Lekker Capital.
Weak ETF demand and growing technical criticism hit Ethereum in August, causing the asset to see its biggest monthly decline in over two years.
“The new marginal buyer doesn’t see value at current prices,” said Quinn Thompson, founder of crypto hedge fund Lekker Capital. DL News.
And it could get worse. Thompson said investors might not be tempted to buy until the price is “significantly lower than it is now.”
He highlighted the recent launch of Ethereum exchange-traded funds, which many hoped would support the second-largest cryptocurrency.
In their first 29 days of trading, Ethereum ETFs saw outflows of $477 million.
Bitcoin ETFs, on the other hand, attracted $5.1 billion over the same period after their debut in January.
Ethereum Sentiment Weakens
It’s not just a lack of institutional interest that’s weighing on Ethereum.
“The sentiment around this situation is very bad,” Brian Rudick, a researcher at GSR, a cryptocurrency trading firm, said in a post on X.
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Rudick said lower network fees contributed to the pessimism.
That’s because more Ethereum activity has moved to more efficient layer-2 blockchains like Coinbase’s Base network. These layer-2s process more transactions at a lower cost, meaning fees on the main Ethereum network have plummeted.
This situation has made the once-deflationary Ether token inflationary again – a dirty word among cryptocurrency users who often vilify the money printing embedded in the traditional financial system.
The bad sentiment is also reflected in Ethereum derivatives markets.
Block Scholes Ethereum Senti-Meter, a tool that measures sentiment in crypto derivatives markets, produced readings below 40 out of 100 for the entire month of August.
Values below 50 indicate a bearish bias.
In August, the price of Ethereum fell 22% to around $2,500.
The last time Ethereum saw such an extreme monthly drop was in June 2022, when it fell around 45% due to a general market meltdown caused by the collapse of the Terra blockchain a month prior.
Competition with Bitcoin
There is also the question of Ethereum’s place in relation to competing crypto assets.
In recent months, presidential candidate Donald Trump has positioned himself as a pro-crypto candidate, promising to create a “strategic” national stockpile of Bitcoin.
In response, Bitcoin has moved in line with Trump’s election chances.
While some, including Lekker Capital’s Thompson, have questioned the connection between Trump and Bitcoin, cryptocurrency market maker Wintermute said the leading crypto asset remains in demand as a “clear election proxy transaction.”
As Bitcoin has become the go-to cryptocurrency for those betting on a Trump election victory, Ethereum has been sidelined, Wintermute said in a Friday note.
Rudick also noted how Ethereum struggles to define itself in other ways.
“It sits in the middle between Bitcoin as the best store of value and Solana as the best high-performance blockchain,” he said.
Tim Craig is DL News DeFi correspondent based in Edinburgh. Feel free to share your tips with us at tim@dlnews.com.
