Ethereum ETFs face setback as BlackRock, Fidelity scale back exposure

Fidelity Ethereum ETFs are at the center of a deepening outflow trend as cooling demand and a persistent price slump drive major issuers to reduce their holdings. On August 19, Fidelity ETH ETFs along with other leading funds recorded significant net outflows highlighting a shift in sentiment among institutional investors.

Latest data from SoSoValue shows that ETH ETFs including Fidelity’s experienced $422 million in net outflows on August 19.This marks the third straight day of negative flows for these funds and the second largest single day outflow since their inception. Fidelity Ethereum ETFs led the pack with $156 million withdrawn underscoring their pivotal role in the current market dynamics.

There was a recorded $122 million in outflows for Grayscale with it’s two other offerings losing an additional $89 million. Same also,there was a recorded of $40 million withdrawal for Bitwise while other prominent issuers such as BlackRock, Franklin Templeton and Invesco recorded smaller outflows range from $3 million to $6 million.

Over the past three days, the cumulative outflows from ETH ETFs including Fidelity Ethereum ETFs have reached approximately $678 million, sparking a notable sell off among major issuers.

Arkham’s Intelligence

On chain data from Arkham Intelligence reveals that Fidelity Ethereum ETFs along with BlackRock and Grayscale have recently offloaded substantial amounts of ETH with some holdings reaching up to $160 million.

This reversal comes after a month long period of accumulation and positive performance for Fidelity ETH ETFs and their peers coinciding with a broader loss of momentum for ETH itself.

Fidelity Ethereum ETFs Respond to ETH Price Drop

The recent outflows from Fidelity Ethereum ETFs are closely tied to Ethereum’s price action. ETH has rolled over after its recent rally hovering around $4,180. Over the past 24 hours, a decline in the coin roughly 1.5% was noticed thereby pushing its weekly losses past 10%. This decline has placed ETH in a critical testing zone with on chain signals urging caution for Fidelity Ethereum ETFs and other investors.

ETH is consolidating just above the 20-day EMA near $4,135 providing immediate support after retreating from this month’s highs around $4,750. Although the broader trend remains bullish supported by rising 50-, 100-, and 200-day EMAs. Short term momentum for ETH and Fidelity’s Ethereum ETFs has noticeably slowed, signaling a pause in the recent rally.The RSI has dropped to 54 down from overbought levels earlier in the month indicating reduced buying pressure.

As a result of this adjustment, ETH and Fidelity’s Ethereum ETFs are positioned in a neutral territory thereby suggesting that the market is balanced and not overextended nor oversold. If ETH can hold above the $4,135 support, Fidelity Ethereum ETFs may see stabilization and prepare for another push toward the $4,500 to $4,700 range.

Irrespective of this,should Ethereum falls below this threshold, traders may shift their focus to the 50-day EMA around $3,690 thereby raising the risk of a more pronounced correction for both Ethereum and Fidelity’s ETH ETFs.

Inspite of the current sell offs, Fidelity’s Ethereum ETFs and other issuers continue to hold a substantial ETH position. With over 6.3 million ETH under management, the funds collectively hold about 5% of the circulating supply worth just under $26 billion at today’s prices.

Nonetheless, if Ethereum struggles to recover, continued outflows from Fidelity’s ETFs could accelerate thereby driving further selling pressure and exacerbating existing downward trends in the market.