Why Ethereum Dragged the Crypto Market Lower This Week

The crypto market has been generally bearish this week as momentum from recent weeks has waned. One of the main reasons for the disappointment was a relatively weak launch of Ethereum (CRYPTO:ETH) ETFs in the US. According to Cointelegraph, Ethereum ETFs saw $113 million in outflows on just their second day of trading, the exact opposite of the momentum we saw in Bitcoin (CRYPTO:BTC) ETFs. And that has dampened some of the optimism for other tokens.

According to data provided by S&P Global Market Intelligence, Ethereum has fallen as much as 12.1% in the past week, Lido Staked Ether (CRYPTO: STETH) is down 12.3%, and Cardano (CRYPTO: ADA) is down 13.1%. The tokens are currently down 8.4%, 8.3%, and 6.5% respectively as of noon ET on Friday.

Ethereum ETF Fails

There are currently eight Ethereum ETFs trading, including Grayscale Trust, which was converted into an ETF. Grayscale Ethereum Trust saw $811 million in outflows in its first two days of trading, offsetting $784.3 million in inflows into seven other ETFs during that time.

One of the biggest reasons cryptocurrencies are set to perform strongly in 2024 was the launch of Bitcoin ETFs earlier in the year, with speculation that this would lead to more ETFs for other tokens. Ethereum was the first to receive ETFs, but the door has opened for other tokens like NEAR and Cardano.

If there is no demand for Ethereum ETFs, I am not sure how much demand there will be for smaller tokens. And that is why altcoins are falling along with Ethereum and its staked offspring.

Cardano hack attempt

Another big news was that a user attempted to attack the Cardano blockchain using a DDoS attack aimed at disrupting the network. A developer stopped the attack and may have also siphoned off the attacker’s funds.

Attacks on blockchain are nothing new, but the fact that such a weakness could be exploited is remarkable.

Altcoins face questions

While none of the week’s news is a game-changer for blockchain, it does raise uncertainty about how much demand there is for the tokens that have cemented themselves as the most valuable cryptocurrency beyond Bitcoin.

Altcoins and utility blockchains clearly have some value, but the value of the tokens themselves do not appear to be as high as Bitcoin’s, which has been a big part of this year’s bullish thesis.

I think the industry needs to get back to building real products and adding value to blockchain through utility and not rely on ETFs for demand. It’s possible that the Ethereum ETF will recover, but there may not be much of an ETF market outside of Bitcoin.

The story continues

I still think altcoins tied to blockchains with high user and developer activity will do well, but this will be a long-term play for investors. This week, the focus is on retail demand from crypto ETFs, and there doesn’t seem to be much demand there.

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Travis Hoium has positions in Ethereum. The Motley Fool has positions in and recommends Bitcoin, Cardano, Ethereum, and Near Protocol. The Motley Fool has a disclosure policy.

The article Why Ethereum Is Pulling Down the Crypto Market This Week was originally published by The Motley Fool