Ethereum (ETH) and the entire cryptocurrency market came under pressure after the regulatory initiative for the digital asset market structure failed to gain support. Analysts viewed it as a potential catalyst for growth for the second-largest cryptocurrency, but the failure changed market expectations. Over the past week, the price of Ethereum has fallen by about 3%, dropping to $2,388, before bouncing back to $2,400. In comparison, other major altcoins like XRP and Hyperliquid lost more than 8%.
Funds focused on spot Ethereum in the U.S. recorded their largest outflow since January. However, the selling began not only against the backdrop of regulatory news: ETH was declining even before the vote and continued to fall after the result. Exchange data points in the same direction: CryptoQuant recorded about 709,400 ETH flowing into Binance on September 11, four days before the vote – the largest daily inflow since June. Large inflows to exchanges may signal that more coins are becoming available for potential sale, but a deposit alone does not mean that the coins were sold. Following the initiative's failure, long positions worth $275 million were liquidated in 20 minutes: Bitcoin dropped to $2,200 at $74,900, and nearly $70 billion was wiped from the market.
The failure removes a potential catalyst for ETH in the short term, but the long-term supply dynamics remain favorable. According to CryptoQuant, Ethereum reserves on exchanges stand at 14.6 million ETH – the lowest since 2016. Reserves have been declining since 2022, and this week's inflow is almost negligible against this trend. Staking also continues to absorb supply: analyst Leon Weidman estimated the total amount of staked ETH at 43 million, which is a record and accounts for about 35% of the supply. Coins in the validator cannot be sold until they pass through the queue, leaving less ETH available for trading than in any previous cycle.
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