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Why Ethereum Dragged the Cryptocurrency Market Down This Week
If Ethereum ETFs fail to succeed, altcoins won’t either.
The cryptocurrency market has crashed across the board this week as the momentum of the past few weeks has faded. One of the main reasons for the disappointment has been a relatively weak launch of Ethereal (ETH 3.12%) ETFs in the United States According to Cointelegraph, Ethereum ETFs saw $113 million in outflows in just their second day of trading, the opposite of the momentum we saw with Bitcoin (BTC 3.10%) ETF. And that has put a damper on some optimism for other tokens.
According to data provided by S&P Global Market InformationEthereum dropped as much as 12.1% last week, Staked beach Ether (STEPHEN 3.28%) was down 12.3% and Cardano (ADA 5.46%) is down 13.1%. The token is currently down 8.4%, 8.3%, and 6.5%, respectively, as of midday ET on Friday.
Ethereum ETF Flop
There are now eight Ethereum ETFs trading, including Grayscale Trust, which has been converted into an ETF. Grayscale Ethereum Trust had $811 million in outflows in its first two days of trading and offset $784.3 million inflows to seven other ETFs during that time.
One of the main reasons cryptocurrencies have had a strong run in 2024 has been the introduction of Bitcoin ETFs earlier in the year and speculation that this would lead to more ETFs for other tokens. Ethereum is the first to get ETFs, but the door was open for other tokens like NEAR and Cardano.
If there is no demand for Ethereum ETFs, I am not sure what demand there will be for even smaller tokens. And that is why altcoins are falling along with Ethereum and its staked progeny.
Cardano Hacking Attempt
Another big news story was an attempted attack on the Cardano blockchain involving a user who used a DDoS attack aimed at disrupting the network. A developer stopped the attack and may have also exploited the attacker’s funds.
Attacks are nothing new to blockchain, but it is noteworthy that such a weakness could be exploited.
Altcoins face questions
None of this week’s news has changed the game for blockchain itself, but it does raise uncertainty about how much demand there is for tokens beyond Bitcoin, which has established itself as the most valuable cryptocurrency.
Altcoins and blockchain utilities clearly have some value, but the value of the tokens themselves does not appear to be as high as that of Bitcoin, which has been a major factor in this year’s bullish thesis.
I think the industry will have to get back to creating real products and adding value to the blockchain through utility and not relying on ETFs for demand. It is possible that the Ethereum ETF will change its mind, but there may not be much of an ETF market outside of Bitcoin.
I still think blockchain-based altcoins with high user and developer activity will do well, but it will be a long-term move for investors. The focus this week is on retail demand for crypto ETFs, and there doesn’t seem to be much demand there.
Travis Hoium has positions in Ethereum. The Motley Fool has positions and recommends Bitcoin, Cardano, Ethereum and Near Protocol. The Motley Fool has a disclosure policy.