Ethereum Underperforms Nvidia, Bitcoin, Meta and Others in Risk-Adjusted Returns Amid Declining Investor Interest

• High outflows of Ethereum ETFs mean low institutional interest amid falling ETH CME trading volume.
• Ethereum underperforms in terms of risk-adjusted returns compared to Nvidia, Bitcoin, Meta, Gold, NASDAQ-100 and others.
• ETH could follow a key trendline to drop towards $2,100 before staging a rally.

Ethereum (ETH) rose 0.1% on Wednesday, following increased outflows and lower trading volume of ETH products. This follows key data showing ETH’s recent underperformance compared to other leading assets.

Daily Market Reasons: Ethereum ETF Exits, ETH CME Volume Decline

US Ethereum exchange-traded funds saw outflows in their first trading session after the Labor Day holiday. Products saw net outflows of $47.4 million, the highest in the past month, according to data from Farside Investors.

Negative flows were led by $52.3 million in outflows from Grayscale’s ETHE. Other issuers saw zero inflows, with the exception of Fidelity’s FETH, which saw inflows of $4.9 million. The large outflows of ETH ETFs on Tuesday align with the general decline in the financial market, where the stock reduced its market capitalization by $1 trillion.

ETH ETF Streams

The consistent shift from zero to negative flows in ETH ETFs also indicates weak demand from institutional investors in Ethereum.

While many attribute the poor performance to a lack of stake within ETFs, another cohort of investors who don’t consider returns on stake are also showing disinterest in ETH. According to CCData, Chicago Mercantile Exchange (CME) Ethereum futures and options trading volume fell 28.7% and 37.0% in August to $14.8 billion and $567 million, respectively. dollars – the lowest volume of futures contracts since December 2023.

This reflects a growing wariness on the part of US investors towards ETH. One possible reason could be ETH’s low risk-adjusted returns compared to other top assets. Assets and stocks such as Nvidia (NVDA), Gold, Meta, Bitcoin, and the NASDAQ-100 have been shown to offer higher risk-adjusted returns than ETH in 2024, according to Ecoinometrics data.

Ethereum Risk Adjusted Return vs Others

Risk-adjusted return is the measure that measures the return of an investment relative to the risk involved.

Another potential reason could be the historically poor performance of Ethereum and the crypto market in Q3, according to Coinglass data. Additionally, members of the crypto community have been debating the drop in Ethereum blockchain revenue since the introduction of blob space in the Dencun upgrade to help scale Layer 2 networks.

ETH Technical Analysis: Ethereum Could Fall to $2,100

Ethereum is trading around $2,450 on Wednesday, up 0.1% on the day. Over the past 24 hours, ETH has seen close to $40 million in liquidations, with long and short liquidations accounting for $26 million and over $13 million respectively.

ETH broke below support around $2,400, briefly dropping to $2,310 before seeing a quick recovery. This indicates strong buying pressure around the $2,300 price level, as evidenced by IntoTheBlock data, which shows that investors purchased over 51 million ETH around the price.

ETH/USDT Daily Chart

On the daily chart, ETH continues to trade around a key trend line that suggests its price could drop to $2,100 to $2,200 in the coming weeks. ETH saw similar declines from August to November 2022 and from July to October 2023 before staging a rally. If history repeats itself, ETH could drop towards the $2,100 support in September before seeing a rally.

A daily candlestick close above $2,817 will invalidate the thesis.

The Relative Strength Index (RSI) and the Stochastic Oscillator (Stoch) indicate a slight upswing.

In the short term, ETH could rise to $2,410 to liquidate positions worth $28.8 million.